Waller: Little role for Fed in addressing climate risks

There is no need for special treatment for climate-related risks in the Federal Reserve’s financial stability monitoring and policies, Fed Governor Christopher Waller said Thursday. Speaking at an economic conference in Spain, Waller said he didn’t doubt the science of climate change, “but my role is not to be a climate policymaker.”

Waller said that climate change poses both potential physical risks—such as negatively affecting property values—and longer-term transition risks. As for the former, “there is a growing body of literature that suggests economic agents are already adjusting behavior to account for risks associated with climate change,” he said. At the same time, banks are already well-prepared to adjust to slow-moving and predictable change. “For example, if banks know that certain industries will gradually become less profitable or assets pledged as collateral will become stranded, they will account for that in their loan pricing, loan duration and risk assessments,” he said.

“As policymakers, we must balance the broad set of risks we face, and we have a responsibility to prioritize using evidence and analysis,” Waller said. “Based on what I’ve seen so far, I believe that placing an outsized focus on climate-related risks is not needed, and the Federal Reserve should focus on more near-term and material risks in keeping with our mandate.”