According to those familiar with the issue, the US effort to focus on the risks of climate has been met with this week’s rare show of resistance.
At Monday’s closure meeting, the heads of the central bank and regulatory authorities that make up the Basel Committee on Banking Supervision rejected a proposal to dissolve the task force overseeing climate work, people not asked to disclose the confidential meeting.
The outcome is that the task force on climate-related financial risks will not be dissolved, people said. However, they added that its long-term fate remains unknown as TFCR currently risks negotiating tips in future consultations with the US over the implementation of Basel III. The US has not yet adopted the final package of Basel III Banking Reforms, which other countries agreed to implement in 2023.
This is the latest in the ongoing differences within the Basel Committee on how to treat climate risks. While the European Central Bank continues to emphasize the importance of dealing with the financial dangers posed by the hotter planetary fallout, US regulators led by the Federal Reserve have pushed back efforts to make climate risk the focus of global financial rules.
The future of the Basel Committee’s climate work was discussed at Monday’s meeting by GHOS, chaired by its supervisory body, the so-called group and supervisory director of central bank governors, or Governor Tiff McClem, Bank of Canada. Ghos saw some proposals on a new approach to climate action proposed by Erik Thedéen, chairman of the Basel Committee.
In a memo dated April 30th, seen by Bloomberg News, Thedéen proposed a pathway to “resetting” the Basel Committee’s work on climate risks as part of an effort to close gaps within the group. The scenario, which envisages the dissolution of TFCR and replacing it with a lower working group, was rejected on Monday.
Basel Committee spokespersons, the Federal Reserve and Thedéen declined to comment.
Co-chaired by Kevin Staro of the Federal Reserve Bank of New York and Frank Elderson, an ECB executive committee member, TFCR has been working on a variety of climate topics since 2019. These spanned three pillars of Basel regulations: capital requirements, supervision and disclosure.
Bloomberg News previously reported that US regulators led by the Fed are consistently putting pressure on Basel to water its climate program. And while TFCR survived Monday’s vote, the US won its efforts to ensure climate-related disclosures were voluntary. Bloomberg News reported in November that US Basel members had pushed to ensure disclosure was not mandatory.
The US effort to dilute Basel’s climate work is an effort before the reelection of self-proclaimed climate skeptic Donald Trump. Bloomberg News previously reported that the Secretary of Currency and the Federal Deposit Insurance Company (three US agencies, represented by the Basel Committee) would be putting pressure on Basel to weaken its climate program.
US officials have gained several key concessions, including halting consultations on introducing industry-wide capital rules as a regulatory lever to address banks’ climate risks. They also ensured that so-called quantitative climate disclosures, such as funded emissions and exposure to physical risks, were subject to jurisdictional discretion.
Fed Chairman Jerome Powell said the Fed “has no orders to promote the energy transition or address climate change,” and instead has “very limited” authority to ensure that the agencies it oversees are “aware and manage” the associated risks. Meanwhile, the ECB was a passionate advocate for stricter climate requirements for European lenders.
In a memo on April 30, Thedéen said existing “differences in perspective limit the potential scope of global standards.”
In a statement released Monday, GHOS said the Basel Committee is “prioritizing its work to analyze the impact of extreme weather events on financial risk.”
