Fed faces climate test as it tries to rescue economy

E&E News discusses how the Fed is facing a climate test as it tries to rescue economy.

Environmentalists have cautioned for years that factoring climate change into major investment decisions isn’t just good for the planet — it’s financially savvy, too.

Now U.S. leaders’ willingness to heed that advice is being put to the test on what could be the most consequential stage yet.

Last month, the Federal Reserve enlisted wealth mammoth BlackRock Inc. to steer its extraordinary efforts to bail out companies reeling from the coronavirus crisis. The initiative, which consists of three bond-buying programs, was made possible in part by $454 billion in pandemic relief funds.

The nitty-gritty details of the deal aren’t yet finalized or available to the public.

But lawmakers, environmentalists and finance experts are watching closely to see what the central bank does next. Top of mind for some is the likelihood that the Fed won’t account for long-term climate risks, like stranded fossil fuel assets, as it directs the world’s largest asset manager to revive the U.S. economy (Climatewire, March 26).

Sarah Bloom Raskin, a former member of the Federal Reserve Board, said the Fed will “call the shots,” and BlackRock, using its expertise, will execute them. She is also a former deputy secretary of the Treasury Department.

But Raskin added that “given that the Fed is presumably acting in the interest of the American people, now and for generations to come, it needs to direct its agents to make recommendations regarding the long-term value of the assets it is purchasing.”

Environmentalists have been quick to weigh in. A coalition of green groups in late March implored Fed Chairman Jerome Powell to deny financial assistance to industries responsible for the “expansion and production of fossil fuels.”

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