Federal Reserve announces new ‘climate exercise’ with six largest banks

The Federal Reserve Board last month announced it will be conducting a new “climate scenario” simulation with six of the country’s largest banks to manage “climate-related financial risks.” 

According to a statement by the Federal Reserve Board, “six of the nation's largest banks will participate in a pilot climate scenario analysis exercise designed to enhance the ability of supervisors and firms to measure and manage climate-related financial risks.” 

The simulation will test the “resilience” of the banks under “different hypothetical climate scenarios.” Participating banks are Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo. 

The exercise will commence early 2023 and is expected to finish at the end of the year. 

The nature of these “climate-related financial risks” is unclear, but the Fed’s statement clarifies that this is not a “stress test” to see if the banks will have enough capital in a scenario like a climate-caused recession. Instead, this exercise will be “exploratory in nature and does not have capital consequences.” 

The rest of the Federal Reserve Board’s explanation offered no further clarity, making reference to cryptic phrases such as “climate pathways.” 

“By considering a range of possible future climate pathways and associated economic and financial developments, scenario analysis can assist firms and supervisors in understanding how climate-related financial risks may manifest and differ from historical experience.” 

The “climate exercise” may validate predictions that banks and financial institutions will become the “new legislatures” as they force individuals and companies into ESG compliance. 

Environmental, social and governance (ESG) is a form of grading companies and countries – and soon people, experts warn – based on how well they conform to the prevailing narrative on environmental and social issues. For example, the more environmentally friendly or racially inclusive a company purports to be, the more virtuous it is and thus more worthy of investment. And if a company’s ESG score is below certain thresholds, they are not to be invested in at all. 

America’s Frontline News previously reported that according to some economists, the government won’t need to mandate an ESG social credit system; institutions will enforce ESG behaviors voluntarily.  

“I think it is highly likely that within the next two years, you’re going to see financial institutions start to use a personalized social credit score of some kind to make decisions about things like your access to loans, your interest rate, or whether you’re eligible for insurance coverage,” said Heartland Institute Director Justin Haskins, according to an analysis by The Epoch Times. “All the signs are pointing to that happening very soon,” he said.   

American Legislative Exchange Council Chief Economist Jonathan Williams predicts that if enough progressive pressure is brought to bear on the financial system, it would mean “having people’s freedoms eroded without any legislation ever having to be passed, whether it’s companies with a radical take on ESG or FICO personal credit scores.”   

Indeed, the consumer credit rating agency FICO openly said in December that personal ESG scores will soon be enforced, stating that “one example would be the inclusion of property energy ratings data in mortgage valuation and decisioning.” In other words, consumers who pay their debts and have excellent financial credit may have trouble getting a mortgage, car loan, bank loan, or credit card if they are not environmentally conscious.    

BlackRock CEO Larry Fink, who heads one of the world’s largest investment firms, was candid about how the company approaches ESG.   

“You have to force behaviors, and at BlackRock, we’re forcing behaviors,” said Fink in 2017.     

Two years ago, the mere suggestion that banks and other corporations would refuse service to individuals based on their carbon footprint would have been dismissed out of hand as a conspiracy theory.    

But a Dutch bank is already advocating for an environmental social credit system that would be based on people’s carbon emissions. 

Barbara Baarsma, the former chair of Rabobank Amsterdam, was appointed last year as CEO of Rabo Carbon Bank, an environmental bank which “trades not money but carbon as currency.”   

The idea, said Baarsma in an interview with Dutch radio station BNR News, is that a limit will be placed on citizens’ carbon emissions, which will be tracked via their transactions and purchases. People can then sell any unused “carbon credits” to others.  

Robobank already rolled out a mobile application earlier this year called Carbon Insights in which bank customers can track their CO2 impact with each purchase.  

“On average a person makes about 35.000 choices every day," said Rabo Carbon Bank Retail Product Manager Fadoua Ajjaji. “However we don’t always know how green our choices are. You might know where the bananas come from that you buy in the supermarket, or when you book a train journey you can roughly calculate how much CO2 emissions that creates. However, with many of our purchases we don’t have a clue what the climate impact might be, even though the money we spend and how we spend it plays a large role in solving climate change. This is a missed opportunity as gaining insights is the first step in making more sustainable choices.”   

“Of course we don’t know the exact products somebody buys in the supermarket, so the CO2 emissions remain an estimation,” Ajjajji added. “For the calculation we look at the payment itself, not the actual receipt. Customers can provide additional information, if they eat meat or own a car, which allows us to make the calculations more accurate.”