Financial Sector‘s Green Commitment Weakens Amidst Regulatory Lapses
New York, NY – July 24, 2025 – the financial sector’s dedication to supporting the green transition appears to be significantly diluted, raising concerns about the role of regulators in addressing climate-related financial risks.
While the Network for Greening the Financial System (NGFS), established in 2017 by eight central banks including the UK, France, and China, initially saw the US Federal Reserve join following President Joe Biden’s election in 2020, the Fed withdrew its membership earlier this year. Despite this,the NGFS,now comprising approximately 140 members,maintains its stance that rising global temperatures pose a threat to economic stability and that the energy transition will create distinct winners and losers. Recent NGFS analysis indicates that economic risks associated with climate change may be greater than previously understood, perhaps leading to financial instability if banks and insurers fail to grasp these implications.
Though, there are growing indications that the United States is exerting pressure on international regulatory bodies to scale back their climate-related initiatives. The latest communiqué from the Financial Stability Board suggests a division among members, with some deeming current work sufficient while others advocate for more action. Similarly, the Basel Committee has reduced its focus on climate-related disclosures and removed compliance requirements. Even though the Basel Committee reportedly resisted a US request to disband its climate task force, US representatives have allegedly abstained from attending meetings, thereby diminishing the task force’s effectiveness.
The author posits that the relentless scientific evidence of global warming’s impact on the financial sector is being met with increasing resistance from the US. The outcome of this standoff remains uncertain, but the author predicts that a negative event, potentially originating in the insurance sector, will eventually highlight the necessity of strengthening financial defenses. In the interim, non-US regulators are urged to maintain pressure on the issue.
