The Biden administration has released a 40-page document entitled “A Roadmap to Build a Climate-Resilient Economy.” Dated Oct. 14, 2021, it has been prepared pursuant to Executive Order 14030, U.S. Climate-Related Financial Risk, signed by President Biden on May 20, 2021.
The news release and fact sheet accompanying the document states, in part: “This year alone, extreme weather has upended the U.S. economy and affected one in three Americans … American families are paying the costs.” Highlights of these documents are presented below.
- The roadmap involves a wide variety of initiatives across multiple federal agencies.
- Federal budgetary processes and procurement standards are affected.
- Disclosures by public companies, investment criteria, and lending standards also are subjects of the document.
‘Climate Change Poses a Systemic Risk’
“Extreme weather has cost Americans an additional $600 billion in physical and economic damages over the past five years alone. Climate-related risks hidden in workers’ retirement plans have already cost American retirees billions in lost pension dollars. Climate change poses a systemic risk to our economy and our financial system, and we must take decisive action to mitigate its impacts.”
Among the climate impacts cited in this section are wildfires and disruptions to international and domestic supply chains.
‘Protecting the Financial Health of Americans’
“By addressing the costs of the climate crisis head-on, the federal government will safeguard the life savings of workers and families, spur the creation of good-paying, union jobs, and ensure the long-term sustainability of U.S. economic prosperity. The roadmap makes clear that protecting the financial health of American households, deploying clean energy in United States, and building an economy from the bottom-up and the middle-out go hand-in-hand.”
Making the Financial System More Climate-Resilient
With the goal of making the U.S. financial system more resilient to climate-related financial risks, the White House press release highlights these three initiatives:
First, the Financial Stability Oversight Council (FSOC) is preparing a report that will start a process in which U.S. financial regulators will develop “analytical tools to mitigate climate-related financial risks.”
Second, the Federal Insurance Office (FIO) in the U.S. Department of the Treasury already is assessing climate-related risks in the insurance sector, especially “the availability and affordability of insurance coverage in high-risk areas for traditionally underserved communities.”
Third, the Securities and Exchange Commission (SEC) is developing new disclosure rules that will “bring greater clarity to investors about the material risks and opportunities that climate change poses to their investments.”
Protecting Savings and Investments
On Oct. 13, 2021, the Department of Labor (DOL) proposed a rule “that would remove barriers to plan fiduciaries’ ability to consider climate change and other environmental, social and governance [ESG] factors when they select investments and exercise shareholder rights.”
The Department of Labor is also working on assessing climate-related risks to the Thrift Savings Plan (TSP), which covers almost 6.5 million federal employees, making it the largest plan of its type in the world.
The press release notes that the U.S. federal government is the biggest single buyer of goods and services in the world, having spent over $650 billion in fiscal year 2020 alone. New rules are being drafted that would “require agencies to consider a supplier’s greenhouse gas emissions when making procurement decisions and to give preference to bids from companies with lower greenhouse gas emissions … [and] would improve the disclosure of greenhouse gas emissions (GHG) in federal contracting and set science-based GHG targets.”
Federal Financial Management and Budgeting
The Office of Management and Budget (OMB), federal agencies, and the Federal Accounting Standards Advisory Board (FASAB) are developing climate-related risk assessments and disclosure requirements for federal agencies.
Next year, the President’s Budget for fiscal year 2023 “will include an assessment of the Federal Government’s climate risk exposure and impacts on the long-term budget outlook, along with additional assessments.”
Federal Lending and Underwriting
The Department of Housing and Urban Development (HUD), the Department of Veterans Affairs (VA), the Department of Agriculture (USDA), and the Treasury Department are adjusting their underwriting and lending standards “to better address the climate-related financial risks to their loan portfolios, while ensuring the safety and security of communities most impacted by climate change.”
Building Resilient Infrastructure and Communities
The Federal Emergency Management Agency (FEMA) is updating its National Flood Insurance Program (NFIP) standards.
Various federal agencies “have come together to build resilience from other types of more severe and extreme weather events, such as heat waves, droughts, storms, and wildfires.”
“The National Ocean and Atmospheric Administration (NOAA) released a suite of products to make the Federal government’s climate information more accessible to Americans.”
“More than 20 agencies released climate adaptation and resilience plans to safeguard federal investments—and taxpayer dollars—from the costs of climate change.”