The Federal Reserve’s Stance Could Derail Global Climate Progress
In a pivotal decision, the Federal Reserve has refused to support the Basel Committee’s initiative to mandate climate risk disclosures for banks. This move not only challenges global regulatory efforts but also places the future of climate-related financial oversight in jeopardy.

What’s at Stake?
The Basel Committee’s framework, known as Pillar 3, sought to create a unified standard for banks to report their exposure to climate-related risks. However, U.S. opposition has led to significant compromises:

• Key disclosures have been made voluntary and subject to national discretion, a sharp contrast to the mandatory frameworks enforced by European regulators like the ECB.
• Without U.S. endorsement, the initiative risks being shelved indefinitely, leaving a critical gap in global financial regulation as climate risks escalate.

Why Does the Fed Oppose This?
The Federal Reserve, under Jerome Powell, has maintained that its mandate does not extend to enforcing climate transition policies. Instead, it focuses on ensuring banks are aware of and can manage risks, stopping short of prescribing specific measures. This contrasts sharply with Europe’s proactive stance, where banks face fines for non-compliance with climate-related disclosure rules.

The Trump Effect
The timing of this decision coincides with President-elect Donald Trump’s return to the White House, bringing with it a renewed pushback against climate policies. Trump’s plans to withdraw the U.S. from the Paris Climate Agreement and dismantle ESG (Environmental, Social, and Governance) rules are already casting a long shadow over global discussions.

Why This Matters Globally
European regulators, including the ECB, Germany’s Bundesbank, and France’s Banque de France, have expressed frustration over the U.S.’s stance. Their commitment to stricter climate oversight highlights the growing divide in global approaches to financial regulation. This discord raises questions about the Basel Committee’s ability to enforce meaningful standards without broad consensus.

What’s Next?
The Basel Committee will meet on November 19 to deliberate on the proposal. However, if no agreement is reached, the plan could face indefinite delays. This outcome would undermine the Committee’s credibility and weaken global efforts to integrate climate risk into financial decision-making.

The Bottom Line
The Federal Reserve’s decision signals a major setback for global climate regulation at a time when coordinated action is needed more than ever. As tensions between the U.S. and Europe grow, the future of financial oversight in addressing climate risks hangs in the balance.