During his run for the White House, Joe Biden promised that on the first day of his presidency he would issue an executive order requiring that all public companies disclose both their climate risks and their output of greenhouse gas emissions.
Now that he's won, climate activists and political observers are uncertain of how Biden might fulfill his commitment — even if they're in agreement that climate reporting is a key tool for slashing planet-warming emissions.
Enhanced transparency in the corporate world could help investors drive capital away from climate laggards and toward companies that are better prepared to weather the economic realities of a warming world, proponents argue.
"I think the Biden administration is going to get creative on how to use all the authorities available to them to address climate change," said Bharat Ramamurti, who heads the Corporate Power Program at the left-leaning Roosevelt Institute, "because obviously, there's not a lot of time to waste."
Biden's transition team did not respond to questions about how or to what extent the incoming administration aims to address climate risk in financial markets. But two sources familiar with policy proposals that were presented to the Biden campaign outlined a couple possibilities.
One option would be for Biden to issue a statement to the Securities and Exchange Commission and other banking regulators, encouraging them to require climate disclosures from the companies they oversee. The president-elect also could call on the Treasury secretary — who heads the Financial Stability Oversight Council — to direct the SEC to begin a rulemaking process to produce a climate risk disclosure framework.
That said, the "most effective executive order" would need to be forged by experts from a range of agencies, said former Federal Reserve official Sarah Bloom Raskin — a rumored contender for Biden's Treasury secretary. She added that this team should be charged with "crafting recommendations for the SEC and others to use in implementing the necessary disclosures, by a certain time."
The success and timing of those disclosures hinges on the SEC's five leaders, who ultimately would need to vote in favor of mandating climate reporting.
Current SEC Chairman Jay Clayton, an independent, and the agency's two Republican commissioners have in recent years spearheaded a range of deregulatory moves that critics say would stunt sustainable investments.
But assuming that Clayton follows tradition and steps down from his role, senior Democratic Commissioner Allison Lee — a vocal advocate for climate disclosures — likely would become acting chair (Climatewire, Nov. 9).
Once Biden officially appoints Lee or someone else to the top role, a Democratic majority would result, opening the door to a vote that could require climate reporting from every publicly traded company in the United States.
The role of the SEC in advancing climate financial reform underscores the importance of appointing climate-savvy financial regulators, say observers. According to Raskin, it would be far easier to "hit the ground running" with leaders in place who understand and are committed to issues such as climate disclosure.
Ramamurti agreed, and said that if Republicans maintain a majority in the Senate, administrative actions would become "particularly important" to enable U.S. progress on climate issues.
Notably, the Biden teams charged with overseeing the administrative transition at the Federal Reserve, SEC, banking regulators and Treasury Department include climate-conscious finance experts.
Among them is Andy Green, who works at the Center for American Progress and has written extensively on climate risk and financial regulation. Amanda Fischer — a vocal advocate of having the Fed account for climate risk and former chief of staff to Rep. Katie Porter (D-Calif.) — was also tapped.
Three people interviewed for this story said they expect that climate-related threats will be a focus for financial nominees in a way they've never have been before.
"The urgent need to secure and stabilize the economy, now and into the future, combined with enormous opportunities that addressing climate change presents, should be at the core of economic policymaking and a priority for any nominee expected to be engaged in this work," Raskin said.