GHG Emissions  -  May 24, 2021

Biden Issues Executive Order to Address Climate-Related Financial Risks

President Biden issued an executive order May 20 directing federal agencies to analyze and mitigate the risk of climate change in systems dealing with financial security.

The Executive Order on Climate-Related Financial Risk will give consumers access to information to understand the risks associated with things like signing a loan for a home or business or managing a retirement fund. The initiative includes mandating that the proper agencies disclose these risks to the public to allow more informed financial decisions.

“The intensifying impacts of climate change present physical risk to assets, publicly traded securities, private investments, and companies — such as increased extreme weather risk leading to supply chain disruptions,” Biden wrote in the order. “The failure of financial institutions to appropriately and adequately account for and measure these physical and transition risks threatens the competitiveness of U.S. companies and markets, the life savings and pensions of U.S. workers and families, and the ability of U.S. financial institutions to serve communities.”

Specifically, the order calls on the government to do the following:

• The National Climate Advisor and the Director of the National Economic Council should develop a strategy to identify and disclose climate-related financial risk to government programs, assets and liabilities. The strategy should identify the financing needed to reach economy-wide net-zero emissions by 2050.
• The Treasury Secretary should identify and assess the stability of the government and U.S. financial system and issue a report with recommendations to reduce risk to that stability.
• The Labor Secretary should consider suspending, revising, or rescinding any rules from the prior administration that would have barred investment firms from considering environmental, social and governance factors, including climate-related risks, in their investment decisions related to workers’ pensions.
• Recommendations for improving how federal financial management and reporting can incorporate climate-related risk should be developed. Additionally, major federal suppliers should be subject to greenhouse gas emissions disclosures.
• The federal government should take steps to ensure fiscal responsibility in response to the risks posed by climate change and develop an annual assessment of its climate-related risk exposure.

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