(LifeSiteNews) – Six of the United States’ largest banks are launching in early 2023 a pilot “climate scenario” exercise in order to better “measure and manage climate-related financial risks.”
In announcing the new analysis exercise, the Federal Reserve did not specify what exactly will be considered a “climate-related financial risk,” but said the banks will consider “a range of possible future climate pathways and associated economic and financial developments.”
The banks participating in the pilot exercise are Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo. The Federal Reserve has shared that its Board “will provide additional details on how the exercise will be conducted and the scenarios that will be used in the pilot” in “the coming months.”
A “Climate Financial Risk 101” webpage by Resources for the Future (RFF), an environmentalist nonprofit supporting net-zero emissions policies, explains that government and corporate policies as well as so-called “climate-related” physical changes can be considered to contribute to “climate financial risk.”
For example, RFF noted that natural disasters such as wildfires and hurricanes, which the organization claims are linked to “rising temperatures” and other climate changes, are “associated with an increase in credit card debt, debt collection, mortgage delinquency, and foreclosure.”
Government regulations or corporate pressure for net-zero carbon emissions could be considered another source of climate financial risk, according to RFF.
“Businesses may suffer from significant losses in the transition to net-zero emissions if their production or business models rely on greenhouse gas-intensive raw materials or processes,” the group noted.
RFF cited as a potential example “a company that builds an expensive power plant with the intention of recouping costs over the next few decades,” which “may later encounter regulations that make the plant unprofitable, rendering the asset ‘stranded.’”
In other words, “When a [city] faces severe infrastructure damage from a natural disaster, or when a company suffers from major profit losses in the energy transition, the likelihood of it defaulting on its debt or declaring bankruptcy increases,” RFF wrote.
The group noted, “Considering these higher default risks, investors often demand a higher return on the investment and increase the at-risk borrower’s cost of raising capital” to a degree that “depends on investor knowledge about the borrower’s climate risk exposure and [actions] to mitigate these risks.”
This observation raises the question of whether the banks participating in the pilot climate scenario exercise will likewise hike up interest on loans, for example, to accord with the borrower’s supposed “climate risk exposure.” This could in turn raise concerns that such bank policies would exacerbate financial difficulties associated with “climate change” policies.
America’s Frontline News remarked that the “‘climate exercise’ may validate predictions that banks and financial institutions will become the “new legislatures” as they force individuals and companies into ESG (environmental, social and governance) compliance.”
ESG scores essentially “grade” companies based on their environmental friendliness, their social awareness and their internal governance practices.
Heartland Institute director Justin Haskins told The Epoch Times he believes it is “highly likely that within the next two years you’re going to see financial institutions start to use a personalized social credit score of some kind to make decisions about things like your access to loans, your interest rate, or whether you’re eligible for insurance coverage.”
“All the signs are pointing to that happening very soon,” he added.
Brian Smith, a former commercial banking analyst for Royal Bank of Canada (RBC), has explained that the ESG system already has massive scope and influence, with companies like Microsoft, Salesforce, Motorola, Adobe, Nike, and hundreds of others having publicly viewable ESG scores indicating what is effectively their “wokeness” level.
According to Smith, CEOs and other executives are being told by massive fund managers such as BlackRock that if their ESG scores fall below a certain number, these managers will have no choice but to sell their shares and allow the stock price to plummet, putting the company’s financial future in jeopardy.
BlackRock CEO Larry Fink frankly shared his view on influencing companies in 2017, admitting, “You have to force behaviors, and at BlackRock, we’re forcing behaviors.”
The consumer credit rating agency FICO has predicted that ESG scores will be used not only to pressure companies but individuals, pointing to the example of “the inclusion of property energy ratings data in mortgage valuation and decisioning,” America’s Frontline News shared.