President Joe Biden signed an executive order directing federal government agencies to assess the risks climate change brings to both public and private financial assets in the U.S., the White House announced on Thursday.
The order, called the Climate-Related Financial Risk, mandates regulators including Treasury Secretary Janet Yellen, who oversees the Financial Stability Oversight Council, and Federal Reserve Chairman Jerome Powell and others to direct federal agencies to examine the financial risks posed by extreme weather to both private and governmental financial institutions. They will then report back within six months with remedies to mitigate such risks.
The order also calls on Labor Secretary Marty Walsh to reverse or change rules put in place by the Trump administration that barred investment firms from considering environmental, social and governance factors, including climate-related risks, in their investment decisions with worker pensions.
National Economic Council director Brian Deese said the US must adjust to a climate that is no longer stable.
“Our modern financial system was built on the assumption that the climate was stable,” Deese said. “And that assumption has largely dominated existing financial models, and it underpinned the way that we invest capital, the way that we have built society, and the way that we have forecasted for the long term.”
Deese added, “Today, it’s clear that we no longer live in such a world.”
Environmental advocate Tracey Lewis, a senior climate finance policy analyst at 350.org, applauded the decision. “This executive order mobilizes the entire finance sector to stop funding dirty fossil fuels and build back fossil free,” Lewis said.
Lewis also added that it is important for Biden to appoint a Federal Reserve chair who will focus on climate when Powell’s term ends in February. Biden can either extend Powell’s appointment or choose someone new. “Instead of using public money to bail out fossil fuel corporations, the Federal Reserve must act on its key role in tackling the climate crisis,” Lewis said. “And most importantly, President Biden must appoint a true climate leader who will reimagine the Fed in its role as the Peoples’ Bank.”
The order is part of Biden’s overall long-term climate agenda which looks to cut greenhouse gas emissions in half by the end of the decade and put the United States on a path to a net-zero emissions economy by 2050.