Another political battle is brewing over how financial regulators and banks deal with the risks of climate change.

Driving the news: Nearly 50 GOP House members this week fired a shot across the Federal Reserve's bow as the central bank increases its focus on climate.

• Their letter, via Politico, warns the Fed against widening "stress tests" of banks to include climate-related risks, alleging the concept is rife with methodological flaws.
• It also criticizes Fed plans to join the Network for Greening the Financial System, a multilateral coalition of central banks, arguing it could bring "harmful restrictions."

Of note: Last month, for the first time, the Fed included climate among the risks described in its formal Financial Stability Report.

Why it matters: Wall Street and its federal overseers are now a major front in climate policy and advocacy wars.

• Big banks are increasingly rolling out new climate-related lending restrictions, though activists point out that the industry's overall fossil finance remains huge.
• And asset management giants like BlackRock have taken a more active role via ESG fund offerings and shareholder votes, though environmentalists say the efforts are too modest.

Catch up fast: The GOP letter is just the latest in a series of skirmishes.

• The Trump-appointed head of the Office of the Comptroller of the Currency recently floated rules that say big banks can't impose sweeping policies that refuse finance for entire project categories and sectors.
• That plan is partly a response to GOP lawmakers dismayed by a number of large banks' climate guidelines that steer clear of Arctic oil, coal and some other project types.
• And the Labor Department recently finalized a rule that limits private retirement plan managers' leeway to invest based on ESG — environmental, social and governance — factors.

What we're watching: The incoming Biden administration.

• Environmentalists want financial regulation and oversight from various agencies to demand better disclosure of climate-related risks and to pressure companies to cut emissions.
• For instance, the group Evergreen Action supports Fed climate stress tests and also wants the Fed to push big banks to adopt decarbonization strategies.
• Another group, the Climate 21 Project, says Biden's Treasury should work with financial regulators to develop climate-focused priorities and "regulatory initiatives."