WASHINGTON (Reuters) – The Federal Reserve is well placed to assess the risk of climate change to the financial system, but should avoid setting real climate policy, Fed Chairman Jerome Powell said on Friday.

Powell said at a virtual event on Friday that elected officials should determine climate policies, while the Fed can ensure the financial system can withstand system shocks due to climate change.

“Central banks can clearly play an important role in collecting data and analysis to understand the macroeconomic consequences of climate change, quantify the risk to the financial system, through scenario analyzes, for example, and guarantee the resilience of the financial sector to climate change. “, He declared at the event, sponsored by the Bank for International Settlements, the Bank of France, the International Monetary Fund and the Network for the Greening of the Financial System.

“We will communicate all of this publicly,” he added. “But we are not and we do not seek to be climate decision makers.”

Powell’s comments come amid mounting political tensions in the United States over the role of financial regulators in mitigating the impact of climate change. Democrats have pushed regulators to take a more active role in protecting banks and other businesses from losses from extreme weather events. Republicans argued that climate policy was outside the purview of financial regulators.

Senator Pat Toomey, R-Pa., The top Republican on the Senate Banking Committee, criticized regional Federal Reserve banks for their research on climate change, calling them “mission drift.”

Powell said the Fed can play a role in educating the public about the risks associated with climate change to help inform policy decisions by elected officials.

“We should avoid trying to fill public policy where governments haven’t done so yet,” Powell said. “It’s not up to us. But nonetheless, I think our work can indirectly help educate the public about what’s going on and… inform other parts of government of the actions they are responsible for evaluating.

Powell weighed in on a number of actions U.S. regulators are currently considering as they determine their role in addressing climate change, including climate scenario analysis and climate risk disclosure.

Powell said the Fed has not determined whether it will go ahead with a climate scenario analysis regime, but that climate scenario analysis provides valuable information to financial institutions.

“If you look through central banks, and in fact what large regulated financial institutions do, climate scenario analysis emerges as one of the main tools for assessing the risks of climate change … and highlighting the risks. “said Powell.

As the Securities and Exchange Commission assesses potential rules requiring all companies to disclose their contributions and exposure to climate change, Powell said financial institutions and policymakers would benefit from consistent disclosure standards.

“We need to have the data, and it needs to be disclosed in a way that helps understand the risks of climate change,” said Powell. “The ideal will be standardized, highly informative and consistent disclosure across jurisdictions. “