On Tuesday, Jerome Powell, the chairman of the Federal Reserve, said that the organization would not act as a "climate policymaker" or engage in activities that go beyond its congressionally mandated scope.
The Fed does not prioritize taking climate change into account when determining monetary policy, according to Powell, who also noted that his agency should leave climate-related matters to the federal government.
"Decisions about policies to directly address climate change should be made by the elected branches of government and thus reflect the public's will as expressed through elections," Powell said on Tuesday.
"Without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals," Powell said. "We are not, and will not be, a 'climate policymaker.'"
Powell's sentiments, presented at a conference hosted by Sweden's central bank, come in the wake of Democratic calls for the Fed to take a more active role in addressing climate change and ensuring the country's financial system is prepared for climate-related threats.
In recent years, the Fed has taken baby steps toward addressing climate change, including the formation of two internal climate change committees. It has also joined the Network for Greening the Financial System, an organization of global central banks dedicated to addressing the systemic risk that climate change poses to the financial industry.
Powell, though, asserted on Tuesday that the Fed has a "narrow" mandate to guarantee that financial institutions "appropriately manage" climate-related risks. "Not wander off to pursue perceived social benefits that are not tightly linked to our statutory goals and authorities," he continued.
And Powell said that this is as involved as the Fed should be in tackling climate-related challenges, despite the Fed's request that major banks assess their financial preparedness for disasters related to climate change.
"The public reasonably expects supervisors to require that banks understand, and appropriately manage, their material risks, including the financial risks of climate change," Powell said.
This year, the Fed plans to launch a pilot program in which six of the country's largest banks will participate in a climate scenario analysis exercise designed to assess the organization's ability to manage catastrophic climate events.
