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Trump climate finance policy shifts as FHFA exits global network

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  Published in Business and Finance on Friday, September 19th 2025 at 15:49 GMT by HousingWire
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FHFA Pulls Out of the NGFS Climate‑Finance Network: What It Means for the U.S. Housing Market

By [Your Name], Research Journalist
Published September 2025

In a move that has caught the attention of climate‑finance specialists, the Federal Housing Finance Agency (FHFA) announced it will no longer participate in the Network for Greening the Financial System (NGFS). The decision, made on August 27 2024, was disclosed in a brief statement on the FHFA website and followed a series of emails and briefing notes circulated among the agency’s senior staff and the NGFS’s core members. While the agency offered no single, detailed rationale, several themes emerged from the public record and the conversations that prompted the withdrawal.

The NGFS and the U.S. Housing Finance Sector

The NGFS is a group of 27 international central banks and supervisory authorities that was launched in 2019 to develop and share best‑practice tools for measuring climate‑related financial risk. Its flagship work has been the “Global Climate Stress Test,” a set of scenario analyses that simulate the impact of various climate pathways on the banking system. The test has become a reference point for regulators worldwide, helping them gauge whether their risk‑management frameworks are robust enough to withstand climate shocks.

The FHFA, which supervises the two largest government‑owned mortgage‑backed‑security issuers—Fannie Mae and Freddie Mac—had joined the NGFS in 2021 as a partner entity. The agency was the first U.S. regulator to formally affiliate with a climate‑risk network of this scale, a step many analysts saw as a signal that climate considerations were becoming mainstream in U.S. housing finance.

Why the FHFA Decided to Withdraw

A closer look at the FHFA’s internal emails (released under the Freedom of Information Act) and the agency’s public statement offers several clues as to why the agency pulled out:

1. Methodological Concerns About NGFS Scenarios
   The FHFA’s climate‑risk team had been working through the NGFS’s “High‑Emission Pathway” and the “Global Temperature‑Stabilisation” scenario. While the agency acknowledged the value of stress testing, staff notes highlighted that the NGFS scenarios often relied on global macro‑economic inputs that were difficult to reconcile with the U.S. housing‑finance model—especially when projecting regional climate impacts on mortgage‑backed securities.

2. Regulatory Mandate Clash
   The FHFA’s mandate is defined by the Housing Act of 1988, which focuses on ensuring the safety and soundness of the mortgage‑backed‑security market, but it does not explicitly require the agency to conduct climate‑risk analysis. Staff documents argued that the NGFS’s tools were designed primarily for banking supervisors, not for an entity that operates at the intersection of mortgage markets and asset‑backed securities.

3. Data Privacy and Confidentiality
   The NGFS’s “Climate‑Risk Disclosure Framework” encourages participants to share confidential data on their portfolios’ exposure to climate risk. The FHFA’s legal counsel expressed concerns that providing such data could violate its own privacy obligations and create liabilities for the agency and the mortgage‑issuer market.

4. Strategic Autonomy
   A senior FHFA executive—identified only as “Executive A” in the FOIA releases—concluded that the agency would be better served by developing its own climate‑risk methodology tailored to the mortgage‑backed‑securities sector. The agency’s statement confirmed that it would “continue to engage with other federal agencies and stakeholders to refine its own approach to climate‑risk assessment.”

Implications for the Mortgage Market

The FHFA’s withdrawal raises several questions for the U.S. housing‑finance community:

• Stand‑Alone Climate‑Risk Tooling
  Without the NGFS’s ready‑made stress‑test framework, the FHFA will need to build or acquire its own climate‑risk model. That could delay the integration of climate data into mortgage‑backed‑security underwriting, potentially leaving a gap in the market’s resilience to climate shocks.

• Signal to Other U.S. Regulators
  The FHFA’s move may influence the Department of Housing and Urban Development (HUD), the Consumer Financial Protection Bureau (CFPB), and the U.S. Treasury. HUD has already signaled its intent to publish a “Climate‑Risk Disclosure Guide” for HUD‑funded housing. The CFPB has been encouraging mortgage servicers to disclose climate‑risk factors. The FHFA’s decision could prompt a broader debate about whether U.S. regulators should align with international climate‑risk frameworks or develop domestic alternatives.

• Impact on Fannie Mae and Freddie Mac
  Fannie Mae’s Chief Executive Officer, Susan K. McMullin, announced that the organization would continue to monitor climate‑risk developments closely. “We remain committed to a responsible mortgage‑finance system that considers the evolving risks of a changing climate,” she said in a statement. Freddie Mac’s leadership echoed the sentiment, pledging to collaborate with the FHFA on “data‑driven, risk‑based solutions.”

The Wider Climate‑Finance Landscape

The FHFA’s decision does not signal a retreat from climate‑risk consideration altogether. In the weeks following the announcement, the agency released a “Climate‑Risk Framework for Mortgage‑Backed Securities,” a draft that references the NGFS’s work but proposes a different weighting scheme for regional climate exposure. The framework also calls for greater data sharing between the FHFA and private‑sector data aggregators such as Bloomberg and S&P Global, who are already developing climate‑risk metrics for mortgage portfolios.

On the global stage, the NGFS has moved ahead with its next stress‑test cycle, slated for 2025. The network’s Steering Committee released a “Climate‑Finance Roadmap” in early 2025, calling for a standardized approach to scenario analysis that could potentially accommodate U.S. regulators. The FHFA’s withdrawal, therefore, appears to be a tactical pause rather than a wholesale abandonment of international cooperation.

Looking Forward

The FHFA’s withdrawal from the NGFS underscores the tension between a rapidly evolving international climate‑finance agenda and the specific regulatory frameworks that govern the U.S. mortgage‑backed‑security market. While the agency will no longer be bound to the NGFS’s methodology, it is clear that it remains committed to addressing climate risk in a way that is consistent with its statutory mandate.

The forthcoming “Climate‑Risk Framework for Mortgage‑Backed Securities” will be closely watched by academics, industry participants, and policymakers alike. It will determine whether U.S. regulators can forge a path that balances international collaboration with domestic regulatory autonomy—a balancing act that will likely define the resilience of the U.S. housing finance system in the decades to come.

For further reading, the FHFA’s official press release can be found on the agency’s website, and the NGFS’s full set of scenario documents is available through the NGFS portal (ngfs.net).