Biden targets climate-related financial risk

President Joe Biden on Thursday released a executive order intended to gather information on the financial risks posed by the climate crisis, including potentially heavy-handed rules for obtaining climate-related disclosures from companies.

“We know that the climate crisis, whether caused by rising seas or extreme weather conditions, already poses growing risks to infrastructure, investments and businesses. However, these risks are often hidden ”, one reads in a press release from the White House. “With so much at stake, this decree ensures that the right rules are in place to properly analyze and mitigate these risks. This includes disclosing these risks to the public and the power of the American people to make informed financial decisions.

The ordinance in part encourages Treasury Secretary Janet Yellen as chair of the Financial Stability Oversight Board to work with member agencies – including the SEC, Consumer Financial Protection and the Commodity Futures Trading Commission – to assess the climate-related financial risk to the stability of the federal government. and the American financial system.

He also urges Yellen to work with member agencies to consider issuing a report in the next 180 days on measures the board recommends to reduce risks to financial stability – including plans agencies are developing to improve related disclosures. climate and other data sources, and integrate climate-related financial risk into regulatory and supervisory practices.

The SEC has previously indicated that climate change reports are on its radar. Then-interim president Allison Herren Lee asked for comments from businesses and others on climate change disclosure in March.

At around the same time, Senator Elizabeth Warren, D-Massachusetts, asked current SEC Chairman Gary Gensler during her confirmation hearing: “Is there a reason why companies should be able to hide their climate risks from investors? ” He said no, provided the risks are significant. Later in the hearing, he noted that billions of dollars had been invested in researching material information on climate risk.

Biden’s executive order also directs US Secretary of Labor Marty Walsh to consider suspending, revising, or removing any Trump administration-era rule that would have prevented investment firms from taking ESG factors into account. such as climate-related risks in their investment decisions related to workers‘ pensions. .

U.S. Department of Labor (DoL) Employment Benefits Security Administration earlier this year said he would not enforce such rules.

The presidential executive order asks the DoL to report on other measures that could protect the life savings and pensions of American workers and families from climate-related financial risks and to assess how the Federal Retirement Thrift Investment Board has taken into account ESG factors such as climate. consideration of risk.

Among other things, the ordinance also requires that the national climate adviser Gina McCarthy and Brian Deese, as director of the National Economic Council, develop over the next 120 days “ a comprehensive strategy on climate risks in the world. government-wide to identify and disclose climate-related risks. financial risk to government programs, assets and liabilities. “

The White House adds, “ This strategy will identify the public and private funding needed to achieve net zero emissions across the economy by 2050 – while advancing economic opportunities, worker empowerment and mitigation. the environment, especially in disadvantaged communities and communities of color. ”

Yellen tweeted in response to the order: ‘Our pensions, our savings – our future livelihoods – depend on the financial sector to build a [and] resilient economy. We all need the best tools [and] the best data to make informed decisions. @ POTUS [executive order] puts us on the right track to get there.

Ceres CEO and Chairman Mindy Lubber said in a statement that the executive order is a “ bold, thoughtful and important step to ensure that all businesses in all sectors of our economy are properly preparing for the climate crisis. ” .

She adds, “ With this new action from the Biden administration, investors, taxpayers and businesses will have the information they need to plan for a sustainable future and help our country meet its critical climate goals. By requiring climate risk disclosure, companies will get the information they need to assess their climate footprint and exposure so they can protect themselves and seize opportunities.

“The momentum behind the call for more transparency, including mandatory climate disclosure rules among financial regulators and US companies, is simply a recognition that voluntary disclosure doesn’t do the job. You simply cannot manage risk without measuring and disclosing it first. Binding rules are essential and will allow decision-makers to make informed and judicious investment and financial market decisions to face the climate crisis ”.