Democratic senators try to force uneconomical green agenda on businesses

That’s right, Senate Democrats have set their sights beyond the Environmental Protection Agency and are now demanding that the Federal Reserve push their big government “green” policy as well.

In their letter, the Democrats call for U.S. financial regulators to follow the lead of the Network for Greening the Financial System, an international group of 18 central banks whose stated goal is “to ensure the financial system is resilient to [climate-related] risks.” What this means in practice is that the NGFS openly promotes “green investment” as one of its main objectives.

Green investment, which purposefully favors lower-carbon emission investment, is inherently at odds with financial regulators’ main goal of ensuring financial stability. Under this scheme, bank loans to companies producing renewable energy would receive a lower risk assessment than under a neutral regime simply for being “green” and favored by Democrats. Conversely, loans to companies producing traditional forms of energy such as oil and coal would be given artificially higher risk weights. This would incentivize banks to load up on green assets they wouldn’t otherwise take on, creating an unstable lending environment.

The recipe is the same as the 2007 subprime mortgage crisis:

1. Incentivized banks give out loans to those they would otherwise deem too risky.
2. Banks respond by loading up on high risk loans.
3. Borrowers begin defaulting and a financial crisis ensues.
4. American taxpayers get stuck with the bill.

We’re witnessing in real time the disastrous consequences of the government forcing an uneconomical green agenda upon businesses. California’s largest utility company PG&E, ironically referenced by Democrats in their letter, which declared bankruptcy over its liabilities from the deadly California wildfires, just announced its plans to dump more than $40 billion worth of green energy contracts that the California government pushed to meet its 100 percent renewable energy by 2045 mandate. Recently, after Gov. Jerry Brown signed legislation increasing the 2030 renewable mandate from 50 percent to 60 percent, PG&E shed its green contracts and declared bankruptcy as the “only viable option.”

But Democrats know the financial risk of pushing their green agenda on businesses, and they inadvertently admit as much in their letter. While drumming up fear to justify regulatory action, the Senate Democrats quote directly from a 2016 report from the Bank of England claiming that transition risk from climate change “could lead to a disorderly re-pricing of carbon-intensive assets and a negative supply shock.” Here, the letter signers are caught blatantly misleading the public.

Conveniently, the Democrats chopped the first half of the sentence they cite from the Bank of England’s report. The full claim in the report reads, “a sudden, unexpected tightening of carbon emission policies could lead to a disorderly re-pricing of carbon-intensive assets and a negative supply shock.”

In other words, the report states that policies such as carbon taxes, stricter car emissions standards and renewable energy mandates pose a serious threat to the well-being of financial institutions. These are all policies pushed by the very Democrats signing this letter.

Of course, this push has nothing to do with the climate and everything to do with taking more control over our institutions. Once viewed through the lens of a green backdoor for more Dodd-Frank style regulations, it’s of little surprise to see Sanders and Warren supporting this letter.

This early push for “green investment” provides a window into the Democrats’ strategy for moving their radical agenda and its corrosive impact on our financial sector. Our financial regulators should not be in the business of pushing friendly loans to politically favored companies and should instead be focused on preserving the stability and integrity of our financial system.

Mike Palicz is federal affairs manager at Americans for Tax Reform.