In an Executive Order issued last week, President Biden acknowledges that “the intensifying impacts of climate change present physical risk to assets, publicly traded securities, private investments, and companies” and that “ the global shift away from carbon-intensive energy sources and industrial processes presents transition risk.” In response, the President has made it a “policy” of his Administration “to advance … clear … accurate disclosure of climate-related financial risk.”
Among other things, government officials are directed to develop, within 120 days “a comprehensive, Government-wide strategy” regarding “the measurement, assessment, mitigation, and disclosure of climate-related financial risk to Federal Government programs, assets, and liabilities,” and “financing needs associated with achieving net-zero greenhouse gas emissions for the U.S. economy by no later than 2050.”
The President has also directed government officials to consider “the necessity of any actions to enhance climate-related disclosures by regulated entities to mitigate climate-related financial risk to the financial system or assets,” “to assess climate-related issues or gaps in the supervision and regulation of insurers,” and to “develop recommendations” regarding “the integration of climate-related financial risk into Federal financial management and financial reporting, especially as that risk relates to Federal lending programs.”
Key specifics as to the latter include recommendations to:
1. “require major Federal suppliers to publicly disclose greenhouse gas emissions and climate-related financial risk and to set science-based reduction targets”; and
2. "ensure that major Federal agency procurements minimize the risk of climate change, … and, where appropriate and feasible, give preference to bids and proposals from suppliers with a lower social cost of greenhouse gas emissions.”
This is another detailed step in the right direction: the U.S. government sending the clear message to the U.S. economy that things need to change. That climate change-related risks need to be identified and acknowledged, and action needs to be taken now, to plan for a sustainable future.
(Image acknowledgement: The White House)
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