[Congressional Record Volume 166, Number 214 (Thursday, December 17, 2020)]
[House]
[Pages H7240-H7241]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       CONCERNS WITH A NEW TREND

  The SPEAKER pro tempore. The Chair recognizes the gentleman from 
Kentucky (Mr. Barr) for 5 minutes.
  Mr. BARR. Mr. Speaker, I rise today to express concern with a trend 
that could harm our financial system, crush jobs, and have lasting 
negative impacts on American competitiveness and economic 
exceptionalism.
  Many on the other side of the aisle are calling for financial 
regulators to inject climate risk scenarios into bank supervision, and 
a new administration will likely prioritize weaponizing financial 
regulation to achieve unrelated climate goals.
  Radical climate activists are incapable of passing the Green New Deal 
through Congress because most Americans understand it will destroy 
jobs, increase energy costs, and destabilize our economy at a time of 
immense fragility and volatility, so they will undoubtedly turn to 
financial regulation and supervision as a backdoor to implement their 
climate agenda.
  Earlier this year, a group of Democrat Senators put these ideas to 
paper in a partisan report, calling on all Federal financial regulators 
to infuse ill-defined climate scenarios into their supervision of banks 
and to discourage financial firms from lending to industries that 
``amplify climate risk,'' such as coal or oil and natural gas. Lost on

[[Page H7241]]

these Senators is the impact that this would have on American jobs and 
cost of living amid a pandemic or the fact that financial supervision 
should rely on risk-based metrics rather than pie-in-the-sky 
sustainability goals.
  This week, the Federal Reserve announced that it joined the Network 
for Greening the Financial System, a consortium of central banks intent 
on weaving climate risk into bank supervision. To those of us closely 
tracking this issue, the decision by the Fed raises many red flags.
  I take no issue with the Fed participating in multilateral 
deliberative bodies. My concern comes from some of the ideas being 
discussed by other members of the NGFS and whether the Fed plans to 
import them.
  The NGFS has made a series of recommendations that are particularly 
troubling. First, it suggests supervisors elevate their regulated 
entities based on sustainability metrics in their portfolios. 
Unfortunately, there is no clear definition of what ``sustainability'' 
means, but you can bet that the climate activists will push it all the 
way to the brink.
  We do not need European regulators to tell our banks how sustainable 
their portfolios should be. Portfolio strength should be measured 
objectively, based on credit risk, not on poorly defined sustainability 
goals.
  Second, the NGFS urges regulators to integrate climate risks into 
financial stability monitoring. Unfortunately, climate stress scenarios 
are plagued with methodological challenges. Material impacts from 
changing weather patterns occur over the course of decades; whereas, 
current stress tests look at a period of nine quarters. It would be 
difficult for a bank to accurately forecast stresses over that length 
of time, and regulators can't account for a bank's dynamic operational 
and risk management practices over that period.
  Further, there is a lack of historical data on the relationship 
between changing weather patterns and financial stress, and the 
available data may have gaps or a disqualifying level of subjectivity.

                              {time}  1330

  Last week, I led a group of 47 House Republicans in a letter to 
Federal Reserve Chairman Powell and Vice Chair Quarles requesting that 
they proceed cautiously in their deliberations on whether to 
incorporate climate change scenarios into financial stress tests. The 
letter highlights many of the methodological challenges I just raised 
and encourages them to consider the negative impact this would have on 
U.S. industry and American jobs.
  As we mentioned in our letter, it is important that the Fed commit to 
not accepting any international climate standards that are not 
appropriately tailored to the U.S. financial system or that would 
adversely impact U.S. competitiveness. We expect U.S. regulators to 
make similar commitments when adopting other international standards, 
such as the Basel Accords and insurance standards from the 
International Association of Insurance Supervisors. This should be no 
different.
  Mr. Speaker, this effort to pressure financial regulators to inject 
climate scenarios into bank stress tests is not about predicting 
financial stress. It is about causing financial stress, causing 
financial stress for an entire segment of the U.S. economy: the energy 
sector.
  Far from promoting financial stability, this dangerous movement, 
right at a time of a global pandemic, to politicize access to capital 
would undermine economic stability by denying American families and 
businesses access to affordable and reliable energy.
  Mr. Speaker, I call on the Federal Reserve to keep this in mind, to 
keep in mind the millions of jobs that are on the line, as Congress 
exercises oversight over the Federal Reserve's mandate to maximize 
employment.

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