Climate Disclosure Lab

Environmental Organizations Press Fed to End Fossil-Fuel Bond Purchases

On July 30, 2020, a group of 69 organizations, including Amazon Watch and GreenPeace USA, expressed concern over the Fed’s failure to “fulfill its responsibility to serve the public interest and promote financial stability due to its investment in the fossil fuel sector.” The letter, addressed to Federal Reserve Chairman Jerome Powell, calls on the Fed to end its purchases of fossil fuel debt via the Secondary Market Corporate Credit Facility. The letter expresses the concern that the legal, financial, and climate risks associated with fossil fuel bonds burden the public and endangers financial stability. The letter also highlights that the Fed is “heavily overweight” in the fossil fuel sector, noting that it is 2 times overweight compared to the US corporate debt market overall, 3.5 times overweight compared to equity market sector weightings, and more than 4 times overweight compared to the employment generated by the fossil fuel sectors.

The letter also highlights that the Fed itself has previously warned that fossil fuels create particular financial risks due to general legal liabilities. In a 2016 Proposed Rule, the Fed warned of the inherent financial risks that fossil fuels create due to federal or state laws. The Fed also acknowledged that monetary damages associated with environmental catastrophes have ranged from hundreds of millions to tens of billions of dollars.

The full letter is available here.