• Corinne Atton

White House Commits to Increased Disclosure of Climate Related Financial Risk

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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