Key US regulatory agencies withdraw from global green finance alliance

January 22, 2025 — In a significant shift in the commitment to combating climate change, the Federal Deposit Insurance Corporation (FDIC) has announced its withdrawal from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). This decision, which echoes a similar move by the Federal Reserve, raises questions about the future of U.S. financial oversight in relation to environmental sustainability.

The FDIC stated that its decision to exit the NGFS was based on the organization’s work not falling within its authorities and mandate.

The NGFS, established in 2017, is a coalition of central banks and financial supervisors aimed at enhancing the role of the financial system in managing climate risks and accelerating the transition to a sustainable economy.

The alliance now has 142 members after the withdrawal of Federal Reserve and FDIC. Central banks and financial regulators from the world’s largest economies, including The People’s Bank of China, European Central Bank and Bank of Japan are members of the group. Emerging economies including India and Brazil are also represented in the alliance.

“As extreme climate events and natural disasters are among the few visible and painful certainties of our times, our community of central banks and supervisors stands as strong and determined as ever, mobilised through its Coalition of the willing,” the NGFS stated following the Federal Reserve’s exit from the alliance.

NGFS’ purpose, according to its website, is to define and promote best practices to be implemented within and outside of the Membership of the NGFS and to conduct or commission analytical work on green finance.

With the departure of these prominent U.S. agencies, concerns mount about the potential for a diminished role of the financial sector in addressing climate-related issues.

Exits from the Federal Reserve and FDIC raises doubts about the commitment to the alliance by other current US members such as Federal Housing Finance Agency, Federal Insurance Office, New York DFS and the Office of the Comptroller of the Currency.

With climate change continuing to be one of the most pressing challenges of our time, the decisions made by the FDIC and Federal Reserve could have far-reaching consequences for both the financial sector and the planet. The coming months will be crucial as stakeholders seek clarity on the future of financial regulation in the context of climate resilience.

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