The ordinance, entitled “Climate-Related Financial Risk,” instructs White House economic and climate advisors to work with the Bureau of Administration and Budget to develop a government-wide strategy for measuring, mitigating and disclosing climate risks for federal agencies. who are called upon to include climate risk in their oversight of key industries and federal funding.
The four-page document is marked as a preliminary draft. The White House and Treasury Department spokesmen had no comment.
“The global relocation of carbon-intensive energy sources and industrial processes around the world harbors transition risks for many branches of the economy,” says the regulation. “At the same time, this global change offers opportunities for generations to improve the competitiveness and economic growth of the US.”
Some of the provisions are known and reflect statements made by Biden and some of his agents, including Treasury Secretary Janet Yellen. The SEC has already begun drafting potential regulations that would require companies to disclose their contributions and be exposed to global warming. The Federal Reserve has also started helping banks for climate risk.
Independent regulators like the SEC and the Fed don’t take direct orders from the White House and would make their own decisions about new rules.
The Executive Ordinance, however, is a go-ahead for the agencies to implement the President’s comprehensive climate agenda.
– The contract directs Yellen, as head of the Financial Stability Oversight Council, to self-assess the risks to the financial system and the US and to submit a report within 180 days. The council, established after the collapse of Wall Street in 2008, includes the heads of all federal financial regulators. Banks, asset managers, insurers and others in the financial services industry are affected by all FSOC measures.
—The Federal Insurance Office is listed in the draft ordinance with instructions for assessing climate-related issues in the supervision of insurers. It is asked to work with government regulators to investigate the potential for “major disruptions” to private insurance coverage in regions of the country that are particularly vulnerable to climate change. Insurance is primarily regulated at the state level and insurers have close relationships with state officials.
– The Department of Labor, which governs pension funds, is asked to revise or repeal the rules that limit the ability of pension fund managers to vote on proposals from shareholders at annual meetings. The Trump-era rules were seen as a way to limit shareholder efforts on environmental, social, and governance factors such as climate risk and employee diversity.
– The Federal Retirement Thrift Investment Board, which oversees the retirement accounts of 6.2 million attendees, is asked to assess the risk of continued investment in fossil fuel stocks.
– Large federal suppliers could be asked to publicly announce their greenhouse gas emissions and their climate risk and to set scientifically sound targets for their reduction. The SEC is already examining whether such information should be required from listed companies. The terms of the contract could affect non-public companies that are not subject to SEC supervision.
– Future purchase decisions by the federal government could take into account the social costs – for example future effects on health and weather – of greenhouse gas emissions. The social cost of carbon is currently set at around $ 51 per tonne, but the administration is expected to increase that number early next year.
– Ministries of Housing and Agriculture are asked to consider including climate-related financial risk in their underwriting standards and loan terms. Nearly 80 percent of US homeowners have government-sponsored mortgages, which could be harder to come by if the underwriting is tightened. The national flood insurance program is currently being revised to better address the climate risks for homeowners.