• The Federal Reserve has dissolved its climate committees and withdrawn from international climate finance networks following the change in U.S. federal administration.
  • The OCC formally withdrew from interagency climate risk principles on March 31, with the Fed and FDIC expected to follow, arguing the focus detracts from core financial stability mandates.
  • Congressional Democrats have responded with legislation to mandate climate stress testing, warning of elevated systemic risk from the policy reversal.

The Federal Reserve's rapid retreat from climate-related financial risk oversight is being characterized by critics as a stark political maneuver, aligning with the broader deregulatory agenda of the second Trump administration. The central bank has dissolved its specialized climate committees, significantly scaled back its climate risk research, and withdrawn from key international collaborations, including the Network of Central Banks and Supervisors for Greening the Financial System (NGFS).

This shift follows a coordinated pullback by federal banking regulators. The Office of the Comptroller of the Currency formally withdrew from the interagency climate risk management principles for large banks on March 31, a move that was widely seen as the first domino to fall. According to people familiar with the matter, both the Federal Reserve and the FDIC are preparing to take similar actions, effectively dismantling the framework established between 2022 and 2024.

Proponents of the rollback within the administration argue that an excessive focus on climate risk distracted regulators from their core mandate of ensuring financial stability, a concern amplified by the high-profile failures of several regional banks in 2024. They contend that these initiatives ventured beyond the Fed's statutory authority and into the realm of social policy.

However, the abrupt reversal has drawn sharp rebuke from Democratic lawmakers and environmental advocates. In response, they have introduced legislation, including H.R.2823 and a companion Senate bill dubbed the "Climate Change Financial Risk Act of 2025," which seeks to forcibly reinstate climate risk oversight by mandating the Fed conduct climate stress tests on large financial institutions. The bills' sponsors argue that without such oversight, U.S. banks are exposed to greater long-term financial risk from increasingly severe weather events and shifting asset values.

The Fed's communications team did not immediately respond to a request for comment on the characterization of its actions as political. Internationally, the U.S. retreat is creating friction, with the Basel Committee on Banking Supervision facing U.S.-led resistance to increased climate risk focus, disrupting global coordination efforts. Despite the official policy shift, some analysts note that market pressures may still compel major U.S. banks and investors to independently continue assessing their climate exposures.