Legislators Urge FRB and SEC to Focus on Inflation and China, Not Climate

Senators Mike Crapo (R-ID,) ranking member of the Finance Committee, and Joni Ernst (R-IA,) ranking member of the Committee on Small Business and Entrepreneurship, et.al., urged the Chair of the Federal Reserve Board ("FRB") to shift its focus away from climate-related matters.

In a letter addressed to FRB Chair Jerome Powell, Senator Crapo and Senator Dan Sullivan (R-AL) expressed concern with the FRB's focus on environmental policy issues while paying insufficient attention to "persistent inflation and a crisis of confidence in the banking sector." The legislators urged Mr. Powell to ensure the FRB only operates within its statutory authority. They pointed out that despite Mr. Powell’s past acknowledgement that the FRB’s role in managing climate-related risk is "very narrow," the FRB has undertaken several climate-related initiatives, such as a "climate stress test."

Separately, in a letter to SEC Chair Gary Gensler, Senator Sullivan, ranking member of the Subcommittee on Oceans, Fisheries, Climate Change, and Manufacturing, criticized the SEC’s focus on climate change risk while investors are exposed to risks from China. Senator Sullivan challenged the SEC’s "aggressive agenda" for imposing climate disclosure requirements that will increase compliance costs for public companies from $3.9 billion to $10.2 billion. Senator Sullivan requested that Mr. Gensler submit the following information:

• information on steps the SEC is taking to address material risks associated with U.S. financial institutions operating in China;
• all staff comment letters issued to registrants since January 1, 2020, regarding the material risks associated with U.S. financial institutions operating in China; and
• an analysis on (i) the risks of financial institutions operating in China for securities markets and (ii) reallocating SEC staff to address U.S. investor exposure to China.