Environmentalists Praise Democratic Request for Greater Oversight, Incorporation of Climate Risk in Fed Lending Programs

Environmental, community, and justice groups who have called for greater oversight of the Federal Reserve's (the Fed) lending programs in response to the coronavirus crisis praised two letters sent to the Fed from Democratic lawmakers. Senators sent a letter Monday followed by a letter from members of Congress on Wednesday. Both letters called for greater oversight of the Fed program for which BlackRock was hired as the third-party investment manager, and urged the Fed to take climate risk into account.

"It's critical that federal relief funds are not used as a backdoor bailout for fossil fuel companies," said Sierra Club campaign representative Ben Cushing. "We applaud these Democrats for working to ensure much-needed transparency and accountability."

Both letters ask for full transparency on the terms and criteria guidelines of the program with the senators' letter saying: "We request that you publicly disclose the investment guidelines FRBNY provides its third-party investment manager, BlackRock Financial Markets Advisory; and that you publicly disclose in a timely and ongoing manner the details of all corporate debt purchases over the course of the programs."

Both letters also ask the Fed to take climate risk into account during its Covid-19 response. The senators write "the U.S. financial system's blindness to climate financial risks means that our response to the current economic crisis will make a future climate crisis more likely," and "the Fed should accelerate its efforts to better understand and price climate financial risks before it is too late." The congressional letter also asks the Fed to "submit a plan to Congress within 90 days that demonstrates how the Fed will ensure that BlackRock's activities can build a more resilient economy and diminish the long-term risks of corporate debt and climate change."

A few days after the Fed's programs were first announced in late March, over 30 public interest and environmental organizations issued a letter to the Fed asking for specific oversight of BlackRock's management of the massive new corporate debt purchase program. They also made clear that resilience to climate shocks should be part of the Fed's response to the Covid-19 crisis.

"Getting our economy through this global pandemic is vitally important, but we can't afford to accelerate climate change in the process. It's encouraging to see Senate Democrats pushing for climate risk to be taken into account," said Moira Birss, Finance Campaign Director at Amazon Watch. "Fossil fuels are inconsistent with goals to manage the climate crisis and many were failing before this crisis hit. Propping them up now is unacceptable for any prudent fiscal policy."

Yesterday, Reuters reported that the Independent Petroleum Association of America (IPAA) is asking the Fed "to reconsider a provision that bars eligible borrowers from using the cash (from the Main Street Lending Program) to repay other loan balances and requires borrowers to promise to repay the Fed before other debt of equal or lower priority." While this is a different Fed program from the one BlackRock was hired to manage, it shows that the oil and gas industry is now actively seeking bailouts from the U.S. government after oil prices plunged into negatives this week.

"It's good to see Democrats stepping up to call for more oversight, transparency, and climate accountability, even as the oil industry actively lobbies for bailouts and Republicans try to insert a pro-corporate agenda into stimulus efforts," said Rachel Curley, Democracy Advocate for Public Citizen's Congress Watch division. "In a time of crisis we should not be giving no- strings- attached bailouts and lucrative contracts to huge corporations while workers across this country are struggling to provide for their families."

The fossil fuel industry's attempts to profit from the coronavirus crisis and bailout packages have been well-documented by numerous watchdog groups. Last week, the Trump Administration floated the idea of paying oil companies billions of dollars to keep oil in the ground during the economic downturn. The next day, the Environmental Protection Agency weakened mercury pollution standards on coal-fired power plants and oil refineries.

Environmental groups will continue to play a watchdog role on the Fed, BlackRock, and other government agencies who are administering parts of the coronavirus bailout and recovery package. Today's letter is evidence that Congressional Democrats are increasingly on the case, as well.