President Biden Signs Executive Order on Climate Change, Focusing on Financial Risk

Today, President Biden issued an executive order on climate change, announcing that it is "the policy of my Administration to advance consistent, clear, intelligible, comparable, and accurate disclosure of climate-related financial risk."

Notably, this executive order requires that "FSOC member agencies" (which includes the SEC) "issu[e] a report . . . [concerning] efforts . . . to integrate consideration of climate-related financial risk in their policies and programs, including a discussion of (A) 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 and a recommended implementation plan for taking those actions; [and] (B) any current approaches to incorporating the consideration of climate-related financial risk into their respective regulatory and supervisory activities . . . ."  

In effect, this executive order provides the imprimatur of the White House to the SEC's recent efforts to mandate financial disclosures concerning the risks of climate change--particularly as the report also invites agencies to specify "new or revised regulatory standards" that "identif[y] [how] climate-related financial risk can be mitigated." 

This executive order also directs other agencies to incorporate climate-change considerations into their regulatory activities.  For example, this order "direct[s] the Federal Insurance Office to assess climate-related issues or gaps in the supervision and regulation of insurers."  Further, the executive order encourages efforts to "require major Federal suppliers to publicly disclose greenhouse gas emissions and climate-related financial risk and to set science-based reduction targets," which would implicate vast swathes of the economy. 

President Biden's executive order represents one of the more significant regulatory initiatives by his administration concerning climate change--and emphasizes that regulatory action concerning climate change disclosures, particularly in the financial sector, will be a preferred tool of the Biden Administration in achieving climate-change related goals. 

https://www.whitehouse.gov/briefing-room/presidential-actions/2021/05/20/executive-order-on-climate-related-financial-risk/