US state AGs urge financial authorities to move away from ESG and climate agenda in wake of bank failures

AP Photo/Jeff Chiu

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Sixteen Republican state attorneys general have called on senior financial authorities to prioritize profitability, liquidity and prudent risk management in response to the recent collapse of Silicon Valley Bank.

In a letter addressed to Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen, and other senior officials, the state attorneys general expressed concern that the emphasis on climate-related financial risks may have distracted regulators from properly managing risk at the failed bank and others.

The collapse of Silicon Valley Bank earlier this month was followed by the closure of Signature Bank in New York. California state regulators closed Silicon Valley Bank on March 10, with the Federal Deposit Insurance Corporation now overseeing its holdings.

The state attorneys general argued that the administration's focus on climate change and converting federal financial regulators into environmental activists may have contributed to the bank failures.

They urged officials to publicly direct banks to prioritize profitability, liquidity, and prudent risk management, noting that declining to serve customers for failing to comply with climate initiatives could threaten the financial system.

“To put it bluntly, the administration’s zealotry in fighting climate change by unwisely and illegally attempting to convert federal financial regulators into environmental activists is inextricably intertwined with these bank failures and the fallout from them,” said the letter, the Daily Wire reported.

“Your warping of the financial regulatory system undermines both the safe and sound operation of financial institutions and the public’s faith in the fairness and efficacy of the regulatory regime,” the letter stated.

“Your forays into environmental regulation undermine faith in financial regulation as a general matter, as they create the perception that the regulatory apparatus is more concerned with political issues than ensuring the integrity of the financial system,” the letter continued. “You should publicly direct banks to pursue profitability, liquidity, and prudent risk management, and note that declining to serve customers for failing to comply with unrealistic climate initiatives like achieving net zero by 2050 is a threat to the financial system.”

Among the letter's signatories were Texas Attorney General Ken Paxton, Ohio Attorney General Dave Yost, and Kentucky Attorney General Daniel Cameron. Utah Attorney General Sean Reyes stated that the failure of Silicon Valley Bank serves as a warning sign that the administration's environmental activism in financial regulation may not only ignore real financial risk but also increase it.

The state attorneys general's call for a renewed focus on core financial principles comes as the Federal Reserve has introduced programs to evaluate climate-related financial risks.

Policymakers recently unveiled an initiative with six of the nation's largest banks to examine risk scenarios posed by rising global temperatures, and another initiative with the Treasury Department to consider the private sector's approach to climate risk.