Treasury-Led Watchdog Scraps Climate Advisory Panels

The Financial Stability Oversight Council is ending the Biden-era advisory groups, signaling a pivot from climate oversight to growth and systemic risk.

Treasury Secretary Scott Bessent attends a press conference in Stockholm, Sweden, on July 29, 2025. Magnus Lejhall/TT News Agency/via Reuters

The U.S. Financial Stability Oversight Council (FSOC), chaired by Treasury Secretary Scott Bessent, voted this week to disband two panels devoted to assessing climate-related risks to the financial system, marking a sharp departure from the Biden-era push to integrate climate policy into financial regulation.

At its Sept. 10 meeting, the FSOC rescinded the charters of the Climate-related Financial Risk Committee and its external advisory body, the Climate-related Financial Risk Advisory Committee (CFRAC). The decision, approved in open session, effectively ends a two-year experiment in embedding climate-related risks into the council’s systemic risk framework.

The panels had been created in 2023 under former Treasury Secretary Janet Yellen, who sought to bring climate-related risks into the FSCO’s work. Yellen said that worsening storms, wildfires, and floods were inflicting economic damage and could set off cascading losses in banking and insurance.

At CFRAC’s first meeting in March 2023, she warned that a “delayed and disorderly transition to a net-zero economy” might itself trigger financial shocks.

The climate committees were emblematic of the Biden administration’s whole-of-government climate-action strategy, which relied on agencies across the federal government—not only environmental regulators—to incorporate climate risk into policy.

That approach extended to financial regulation, perhaps most prominently with a Securities and Exchange Commission (SEC) rule finalized in March 2024 requiring publicly traded companies to disclose their greenhouse gas emissions and assess climate risks in their filings.

The SEC rule drew immediate pushback from Republican lawmakers and several states, which sued to block the mandate as regulatory overreach. Opponents argued that the agency lacked congressional authority to impose climate disclosure requirements and that the measure was part of a broader White House effort to steer investment decisions on political rather than financial grounds.

When President Donald Trump returned to office in 2025, the SEC withdrew its legal defense of the rule, effectively halting enforcement.

Bessent’s tenure at the Treasury has coincided with that shift. In remarks at the Sept. 10 FSOC meeting, he said the council must redirect its focus toward what he called “core financial stability issues,” which normally include systemic risk monitoring, bank safety and soundness, oversight of nonbank financial institutions, crisis preparedness, and ensuring efficient capital markets—as opposed to climate.

“By rescinding these charters, the council can better focus its attention and resources on core financial stability issues and our efforts to promote economic growth and security while maintaining safety and soundness and protecting consumers,” Bessent said.

For climate advocates, the dismantling of CFRAC marks a setback in efforts to prepare the financial system for climate-related disruptions.

“The Trump administration is set to destroy key protections against the risks climate change poses to our economy,” Tracey Lewis, senior policy counsel for Public Citizen’s Climate Program and a member of CFRAC, said in a statement.

“The committee’s work on the financial impacts of climate disasters on housing, homeowners insurance, and financial regulation play[s] an important role in protecting the safety and soundness of the American financial system.”

Bessent, however, has made clear that his philosophy is rooted in growth as a central buffer against financial shocks. In prepared remarks at the Sept. 10 session, he said that economic stagnation posed a significant risk to stability, citing the Latin American debt crisis of the 1980s, Japan’s “Lost Decades,” and the eurozone debt crisis as cautionary examples.

“Growth is the antidote to stagnation,” Bessent told FSOC members. “Expanding economic growth must be among FSOC’s top priorities.”

By contrast, Bessent identified “arrogance, bureaucracy, and complacency” as factors that can—like cancer—metastasize and lead to stagnation.

“And stagnation leads to collapse. That’s why companies—just as countries—must constantly guard against stagnation,” he said. “Yet regulators too often overlook the threat economic stagnation poses to financial stability. And they come to regret it later.”

The decision to eliminate the climate panels also reflects Bessent’s broader skepticism of what he has described as regulatory mission creep. In a recent interview with The International Economy, he accused the Federal Reserve of politicization by extending its remit into areas such as climate policy, diversity initiatives, and distributional questions better left to Congress.

He called for a sweeping review of the central bank that could strip away supervisory powers, scale back its use of unconventional monetary tools, and refocus its mandate narrowly on interest rates and inflation.

“Whether intended or not, the Federal Reserve’s decision to engage in political activity provoked legitimate criticism that undermines its ability to retain independence on its core mission of monetary policy,” Bessent said.

Independence is “the cornerstone of sustainable economic growth and stability,” he said, adding that markets can only function correctly if they believe the Fed makes decisions based on data rather than political considerations.