Climate advocacy groups are urging the Federal Reserve to stop buying corporate debt from oil and gas companies, warning that the central bank's purchases are intensifying climate-related risks to financial stability.

The Fed is "potentially exacerbating the climate crisis and exposing the public to financial losses" through its corporate bond purchases, the groups said in a letter to the central bank. Nearly 70 groups signed the letter, including Greenpeace USA, the League of Conservation Voters, the Sierra Club and the Natural Resources Defense Council.

"The board should be working to reduce systemic risk during this dual health and economic crisis," the groups wrote. "Instead, it is intensifying risks to financial stability by supporting the fossil fuel sector."

The Fed had bought nearly $140 million in energy companies' bonds through its Secondary Market Corporate Credit Facility as of June 30, according to data the Fed released July 10. That comprised 9.32% of the Fed's corporate bond holdings through the SMCCF, which had bought nearly $1.5 billion in corporate bonds across all sectors as of last month. In all, $134 million of the Fed's direct energy bond purchases come from fossil fuel companies, the environmental groups said. The central bank has also indirectly invested in the sector's bonds through its purchases of exchange-traded funds that give investors a broad exposure to the corporate debt market.

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The Fed launched its program to alleviate liquidity concerns in corporate bond markets, which had seized up early in the pandemic as investors worried about rising default risks at companies. The Fed's promise of a backstop helped revive the market, fueling record issuance even among riskier borrowers and bringing borrowing costs back down after this year's spikes.

The Fed's purchases of corporate bonds, which stood at roughly $12 billion as of July 22, have been far below its total capacity of $750 billion through the SMCCF and a related Primary Market Corporate Credit Facility. The latter facility will lend to companies directly rather than buying bonds in the secondary market but has not yet launched.

Small and midsize businesses are also able to borrow from the Fed through its Main Street loan program, where the Fed's change to allow refinancing of existing loans is expected to benefit smaller oil producers.

Former Fed Gov. Sarah Bloom Raskin has criticized the Fed's decision to include the sector in its lending facilities, writing in an op-ed in The New York Times in May that the central bank is "ignoring clear warning signs about the economic repercussions of the impending climate crisis."

The Fed did not immediately respond to a request for comment.

Fed officials have spoken openly about the risks that climate change poses to local economies and longer-term financial stability concerns. In November 2019, the San Francisco Fed held a climate change research conference, with its leader, Mary Daly, saying it is an issue the central bank cannot "afford to ignore."

Fed Chairman Jerome Powell told reporters in January that climate change is a "very important issue" and that the Fed has a role to play to mitigate it. But Powell also indicated the responsibility in addressing it lies elsewhere in government.

"Society's overall response to climate change needs to be decided by elected officials and not by the Fed," Powell said.