President Joe Biden plans to use every tool at his disposal in the fight against climate change, including financial regulation. While not an intuitive choice, supporters say mandating that public companies and investment firms quantify and disclose climate risks — and the costs associated with them — is a bold step that could make ESG (environmental, social and governance) data as commonplace in corporate financial reports as sales and profit figures.
“The recent change in administration in Washington has contributed to a renewed sense of urgency around environmental issues,” said Leahruth Jemilo, head of the ESG advisory practice at Corbin Advisors.
The Treasury Department is reportedly adding a “climate czar,” the Wall Street Journal reported earlier this month. At the New York Times DealBook virtual conference on Monday, Treasury Secretary Janet Yellen floated an idea of what a framework for evaluating climate risk might look like, saying that banks and insurers could be subject to climate stress tests.
Although they would not limit companies’ ability to pay out dividends or impose new capital requirements, Yellen said they could still be an effective risk-discovery and -mitigation tool. She clarified that implementation and oversight would fall under the purview of the Federal Reserve and other banking regulators, not the Treasury, although she said the Treasury could “facilitate” the process.
Yellen also seemed to dismiss the idea that voluntary oversight measures on the part of the financial services industry would suffice, saying, “It certainly requires policy.”
The Securities and Exchange Commission already has created a new, climate-focused senior policy adviser position, and the Federal Reserve in December joined the Network of Central Banks and Supervisors for Greening the Financial System, a consortium of more than 80 countries.
Ben Koltun, director of research at consulting firm Beacon Policy Advisors, said these announcements are a signal to investors, executives and policymakers. “It does speak to the whole-government approach the Biden administration is taking with climate change,” he said.
Climate activists such as environmental nonprofit group Ceres want Gary Gensler, the former Commodity Futures Trading Commission chair who is Biden’s nominee to lead the SEC, to mandate that public companies…(Read the complete article on NBC News)