Europe has overtaken America. How far do banks monitor people’s behavior?

The task of all central banks is to take care of monetary and price stability. Until recently, it was not customary for these financial institutions to engage in activities related to climate protection, and even today it is considered to be overstepping their mandates. The same was true of commercial banks, where today the green agenda forms a very important part of their policy. However, there is a sharp clash between the European Central Bank (ECB) and the US Fed over whether this is too much.

At the start of the year, the ECB announced that it was “intensifying climate action, focusing on the transition to a green economy, climate and nature-related risks”. The main reason is that “the growing impact of the climate crisis on the economy and the financial system requires more measures.” Therefore, in the coming years, the ECB will be interested in “the consequences of the transition to a green economy, the physical impact of climate change and nature-related risks for the economy and the financial system”.

Central banks oversee commercial banks, which are under intense pressure to publish, like other firms and financial institutions, mandatory reports on how they are building a “sustainable” future. Because today the market demands it, or rather the European regulations to which the market has submitted.

But in this practice, Europe is even further than the United States, which, on the other hand, stops chasing in all other economic and market areas. There is still pressure from European central bankers for commercial banks to show even more information about how they fulfill their green obligations. But the Americans don’t like it anymore.

The head of the US Fed, Jerome Powell, consistently claims that central banks should not interfere in any way in climate policy, which is successfully growing through the European and American economies today. In particular, Powell does not like the fact that ECB representatives are demanding that the Basel Committee on Banking Supervision be able to demand from individual commercial banks more detailed and sophisticated strategies for meeting green goals. That is, for banks to provide, among other things, more detailed information about their customers’ carbon footprints. According to the Americans, however, the Basel Committee, which ensures cooperation between banking supervision institutions, i.e. central banks, would be exceeding its powers.

Rebellion at Warren Buffett

As we recently reported, the resistance to even greater penetration of climate policy into the world of finance and business also points to the events at Berkshire Hathaway, founded by one of the world’s richest men, Warren Buffett. Its shareholders rebelled against forced green and social policies. They don’t want even more pressure to report how much they care about the climate and how much they support diversity and inclusion in the workplace.

Shareholders at Berkshire’s annual meeting last week overwhelmingly rejected six proposals related to environmental and social policies at billionaire Warren Buffett’s conglomerate. They rejected two proposals that would require the company to disclose even more information about its efforts to tackle climate change and greenhouse gas emissions across all its financial operations. They were also opposed to a proposal to disclose more about how they are trying to promote “diversity, equality and inclusion in the workplace”.

A proposal for Berkshire to report annually on how dependent its business operations are on the “hostile” Chinese government was also rejected. The company already invested in the Chinese car manufacturer BYD in 2008, but in 2022 it began to reduce its stake. Buffett owns shares in Berkshire that give him a 31 percent voting stake. Proposals that Buffett rejects have little chance of acceptance.