Federal Reserve Chairman Jerome Powell believes climate change poses a threat to the economy and the global financial system -- but he views it as a longer-run issue.
While fielding questions from Sen. Brian Schatz, D-Hawaii, during his two-day appearance on Capitol Hill this week, Powell agreed that increased severe weather posed a risk to the institutions he supervises.
“And you know this senator, we do require financial institutions that supervise to have a plan and to deal with severe weather events, particularly those in areas that are exposed to severe weather,” Powell said on Thursday before the Senate Banking Committee.
Schatz, one of the Senate’s most outspoken climate change hawks, pressed whether the U.S. central bank would -- despite the Fed’s desire to stay out of the political fray -- begin to integrate climate-related financial risks into its day-to-day role of keeping the economy steady.
That’s because in April, the Bank of England published an open letter from several of its leaders disclosing how it planned to assess climate-related financial risk -- and why it was doing so.
“The prime responsibility for climate policy will continue to sit with governments,” the letter said. “And the private sector will determine the success of the adjustment. But as financial policymakers and prudential supervisors, we cannot ignore the obvious risks before our eyes.”
“I guess I see climate change as a longer-run issue,” he said. “I don’t know that incorporating it into the day-to-day supervision of financial institutions would add much value.”
He noted that the Fed has had a policy in place and conducted “quite a lot” of research, while also incorporating it into its supervision.