Did Trump Influence? US Fed Halts Climate Stress Testing

Suspension of 'Climate Scenario Analysis' for Major Banks
Withdrawal from the Network for Greening the Financial System (NGFS) Last Month
Move Seen as Conscious of Trump's "Green New Scam" Claim

The U.S. Federal Reserve (Fed) has halted climate stress tests on major banks for the first time in two years. This move is interpreted as aligning with former President Donald Trump's stance, who has criticized the Biden administration's green policies by calling climate change claims a "scam."

On the 6th (local time), Bloomberg News reported, citing sources, that the Fed will not require six major banks, including JP Morgan Chase, Citigroup, and Goldman Sachs, to submit data for climate scenario analysis.

Previously, the Fed launched a pilot project in 2023 for climate scenario analysis. The project aimed to assess financial risks due to climate change and the resilience of financial institutions. For example, it evaluated the impact on banks' residential and commercial real estate portfolios depending on the intensity of climate change. Analysts viewed this project as aligned with former President Biden's green policies.

However, around January 20th, coinciding with President Trump's inauguration, the Fed began distancing itself from climate finance. On January 17th, the Fed also withdrew from the Network for Greening the Financial System (NGFS), a global consortium of central banks and financial regulators established to address climate change and environmental risks. Additionally, the six major U.S. banks have been withdrawing one after another from the Net-Zero Banking Alliance since the end of last year.

In the market, this is interpreted as aligning with Trump's stance. President Trump claims that climate change is not real and that fossil fuels are not the main cause of global warming. He has also criticized former President Biden's green policies as the "Green New Scam." On his first day in office, Trump declared a "national energy emergency" to expand fossil fuel energy production and has since repeatedly dismantled or scaled back Biden's green policies.

However, Fed Chair Jerome Powell has drawn a line regarding the role of monetary authorities in climate policy, even during the Biden administration. In a forum held in Sweden in January 2021, he stated, "The Fed is not an institution that sets climate policy, and it will not become one in the future."