Federal Reserve And 6 Largest American Banks To Trial Carbon-Based Social Credit Score System And Climate Investing

The U.S. Federal Reserve announced last week that they and six other of the largest banks in the country will pilot a new framework that will allow them to better access the risk of a potential investment, and where these investments stand with their environmental values.

This trial exercise will include Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo. The Federal Reserve has not released too many details on how the simulation operate, but will provide more when the meeting draws near.

According to the Fed’s press release,

[…] Six of the nation’s largest banks will participate in a pilot climate scenario analysis exercise designed to enhance the ability of supervisors and firms to measure and manage climate-related financial risks. Scenario analysis—in which the resilience of financial institutions is assessed under different hypothetical climate scenarios—is an emerging tool to assess climate-related financial risks, and there will be no capital or supervisory implications from the pilot.

The pilot exercise will be launched in early 2023 and is expected to conclude around the end of the year. At the beginning of the exercise, the Board will publish details of the climate, economic, and financial variables that make up the climate scenario narratives.

Over the course of the pilot, participating firms will analyze the impact of the scenarios on specific portfolios and business strategies. The Board will then review firm analysis and engage with those firms to build capacity to manage climate-related financial risks. The Board anticipates publishing insights gained from the pilot at an aggregate level, reflecting what has been learned about climate risk management practices and how insights from scenario analysis will help identify potential risks and promote risk management practices. No firm-specific information will be released.

Climate scenario analysis is distinct and separate from bank stress tests. The Board’s stress tests are designed to assess whether large banks have enough capital to continue lending to households and businesses during a severe recession. The climate scenario analysis exercise, on the other hand, is exploratory in nature and does not have capital consequences. By considering a range of possible future climate pathways and associated economic and financial developments, scenario analysis can assist firms and supervisors in understanding how climate-related financial risks may manifest and differ from historical experience.

For further clarification, this type of investing is what is known as Environmental, Social, and Governance Investing, or ESG for short.

As explained by Investopedia,

Environmental, social, and governance (ESG) investing refers to a set of standards for a company’s behavior used by socially conscious investors to screen potential investments.
Environmental criteria consider how a company safeguards the environment, including corporate policies addressing climate change, for example. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.
Several financial firms have come out with ESG ratings and scoring systems in recent years. For instance, MSCI has come out with a ratings scheme covering more than 8,500 companies around the world, giving them scores and letter grades based on their compliance with ESG standards and initiatives. Several other companies like Morningstar have also released ESG scores for publicly-traded companies.

AUTHOR COMMENTARY

If you want to create change, go after people’s pocketbooks.

A feast is made for laughter, and wine maketh merry: but money answereth all things.
Ecclesiastes 10:19

If the six largest banks, including the Federal Reserve, can indirectly slap scores on business for following the UN Sustainable Goals, and only lend funds to those who are aligned with these goals, it will naturally cause MANY to get into lockstep very quickly.

This will be imperative when the American and Western economies finally have a colossal implosion, when all the smaller banks, corporations, and homeowners will be looking for a bailout and forgiveness. If these companies and people are not aligned with these climate-based goals, they will not receive a full investment, if none at all.

Not that long ago the World Economic Forum said that the same people who bought into the Covid War would also accept a carbon-based social credit score. This is an example as to how they would do it.

[9] But they that will be rich fall into temptation and a snare, and into many foolish and hurtful lusts, which drown men in destruction and perdition. [10] For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.
1 Timothy 6:9-10

[7] Who goeth a warfare any time at his own charges? who planteth a vineyard, and eateth not of the fruit thereof? or who feedeth a flock, and eateth not of the milk of the flock? [8] Say I these things as a man? or saith not the law the same also? [9] For it is written in the law of Moses, Thou shalt not muzzle the mouth of the ox that treadeth out the corn. Doth God take care for oxen? [10] Or saith he it altogether for our sakes? For our sakes, no doubt, this is written: that he that ploweth should plow in hope; and that he that thresheth in hope should be partaker of his hope. (1 Corinthians 9:7-10).

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