Powell reiterates Fed is not going to become a ‘climate policymaker’

Federal Reserve Chairman Jerome Powell on Tuesday said the central bank would not intervene in issues such as climate change that fall outside its mandate set by Congress, and vowed the institution would not become “climate policy.”

Powell’s remarks, made at a conference hosted by Sweden’s central bank, followed calls by some Democrats for the Fed to play a more active role in addressing climate change and ensuring the country’s financial system is prepared for climate-related risks .

Powell reiterated that climate change is not a major consideration for the Fed in making monetary policy, noting that climate-related issues are more for the federal government than his institution.

“Decisions on policies to directly address climate change must be made by the elected branches of government and thus reflect the will of the public as expressed through elections,” Powell said Tuesday.

“Without express legislation from Congress, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-related goals,” Powell said. “We are not and will not be ‘climate policy’.”

In recent years, the Federal Reserve has been tiptoeing around climate change, including creating two internal committees focused on the issue. It also joined the Greening the Financial System Network, a group of global central banks focused on addressing the systemic risk that climate change poses to the financial sector.

But Powell on Tuesday said the Fed’s regulatory powers give it a “narrow” role to ensure that financial institutions “appropriately manage” climate-related risks. He added that the Fed “should not deviate to pursue purported social benefits that are not closely related to our statutory purposes and powers.”

And while the Fed has asked major banks to examine their financial preparedness in the event of climate-related disasters, Powell said that’s as engaged as the institution needs to be in addressing climate-related issues.

“The public reasonably expects supervisors to require banks to understand and appropriately manage their material risks, including the financial risks of climate change,” Powell said.

The Federal Reserve is set to launch a pilot program this year for six of the nation’s largest banks to participate in a climate scenario analysis that will examine the firms’ ability to manage major climate events.

— CNBC’s Jeff Cox contributed reporting