Earlier this month, Federal Reserve Chairman Jerome Powell shot down policies that would force Environmental, Social, and Governance (ESG) directives on the banking sector. He also stressed keeping central banking free of social and political decisions. 

“Without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals,” Powell said at a recent conference in Stockholm. “We are not, and will not be, a ‘climate policymaker.’”

This is not the first time Chairman Powell has voiced opposition to allowing climate risk, for example, to be a main consideration for monetary policy. In 2021, he echoed these concerns. While the agency has formed several exploratory committees and is participating in the Network for Greening the Financial System, Powell stopped short of endorsing any measurement of climate risk—or the “E” prong in ESG—on oversight of banks and the U.S. financial system. 

This is a major repudiation of the Biden administration’s ESG agenda as other departments are weighing climate financial risks at the behest of the administration.

The Federal Reserve’s mission is to “foster the stability, integrity, and efficiency of the nation’s monetary, financial, and payment systems so as to promote optimal macroeconomic performance.”

Chairman Powell is right. The Fed’s role today is to keep inflation at a marginal rate and not stray from its mission of promoting a “safe and sound banking system and stable financial markets.”

To learn more about ESG, go HERE.