¿Kâffi Ceccô?: Central bankers' climate standoff

Today's newsletter looks at a surprising show of resistance against US pressure to downplay climate risk in the global financial industry. You can read the full story on Bloomberg.com. For unlimited access to climate and energy news, please subscribe.

Europe's central bankers fight back

By Alastair Marsh

For almost two years, the US has had the upper hand in a tug of war at the primary standard-setting body for the banking industry over how lenders should manage the risks posed by a warming planet. Then, last week, it was met with a rare and surprising show of resistance.

The debate has played out within the Basel Committee on Banking Supervision, a group of the world's major financial regulators and central banks that coordinate rules and oversight of lenders.

US regulatory agencies led by the Federal Reserve have said the Basel Committee's proposals to make climate risk a focus of global financial rules oversteps its purpose, and they have pressured the committee to weaken its climate program. Meanwhile, the European Central Bank has been an avid supporter of more stringent climate requirements.

Jerome Powell, chairman of the US Federal Reserve Photographer: Kent Nishimura/Bloomberg

On several occasions over the past 18 months — much to the chagrin of the Europeans — the US has won concessions by taking a hard line at the committee. These include halting talks on introducing industrywide capital rules as a regulatory lever for addressing banks' climate risks, Bloomberg News has reported. The US has also ensured that so-called quantitative climate disclosures, such as financed emissions and exposures to physical risks, will be subject to jurisdictional discretion.

In what was seen as another attempt to placate US demands, the chair of the Basel Committee — Swedish central bank Governor Erik Thedeen — put forward a proposal to disband the taskforce overseeing climate work.

Yet in a break from recent trends, that suggestion was rejected by a group of the heads of the central banks and regulators that make up the Basel Committee, Bloomberg News reported on Friday.

It may be too soon for those worried about climate change to celebrate, however. The long-term fate of the Task Force on Climate-related Financial Risks (TFCR), the engine room for all things climate at the committee, remains unclear. In reality, the TFCR now risks becoming a bargaining chip in future talks with the US on adopting the final package of Basel III bank reforms, which other countries agreed to implement back in 2023.

Much like the United Nations, NATO and the G-20, President Donald Trump's deep-seated mistrust of multilateralism also poses a serious threat to the Basel Committee. And that in turn may have knock-on effects for the financial industry's ability to prepare for the economic shocks posed by extreme weather events and assets that may become stranded.

Read the full story on Bloomberg.com.

What's the risk?

30%

This is how much global economic losses may total in a scenario where the planet's average temperature rises 3C above pre-industrial levels, according to the Network for Greening the Financial System (NGFS).

In the near term

"Extreme weather events and abrupt changes in transition policies can significantly affect our economies and financial sectors in the short run. Reducing or delaying climate action will likely worsen future economic damage."

Sabine Mauderer

Official at Germany's Bundesbank and NGFS chair

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Low-carbon tech investments reached $2.1 trillion last year. But with the whole world trying to work out how to navigate US President Donald Trump's unpredictable policy agenda, is 2025 still a good time to invest in climate tech? On the latest episode of Zero Akshat Rathi interviews Greg Wasserman, head of private company climate investment at Wellington Management, which oversees more than $1 trillion in assets. Wasserman has to make investment decisions here and now about companies and technologies — weighing risks and opportunities in a volatile market. Listen now, and subscribe on Apple, Spotify, or YouTube to get new episodes of Zero every Thursday.

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Attention all filmmakers

Do you have a compelling story you want to tell? The Bloomberg Green Docs competition is open to all eligible filmmakers who would like to compete to win a $25,000 grand prize for a short climate documentary. The aim is to explore our climate future with documentaries that reveal the world we are making today. Films must be under 10 minutes and submissions will be accepted through May 23. The winner will be announced at the Bloomberg Green Docs Film Festival in Seattle on July 16. Visit the Bloomberg Green Docs official site for more information and rules.