A new national strategy report aims to combat climate-related risks to the US financial system.
On October 14, 2021, the Biden Administration issued “A Roadmap to Build a Climate-Resilient Economy” (the Roadmap), a national strategy report with tangible initiatives that build on ideas set out in the May 2021 Executive Order on Climate-Related Financial Risk. The Roadmap is an ambitious and wide-ranging reflection of the Administration’s “whole of government” approach to combating climate change and the climate-related risks that threaten the US economy.
Climate Risk Accountability Framework
The Roadmap is premised on recognizing the intrinsic connection between climate change and the US economy, and the vital role the US government must play to proactively address climate change risks. The Roadmap is therefore built on five core principles:
The Implementation Strategy
To implement its initiatives, the Roadmap focuses on six major work streams designed to identify, measure, disclose, manage, and mitigate the systemic risks posed by climate change:
Climate Change as a Systemic Risk
Labeling climate change as a systemic risk is more than mere rhetoric. It allows the Financial Stability Oversight Council (FSOC) — a group consisting of the heads of every major US financial market supervisory and regulatory agency — to use all means available under statutory authority to address the risks. Indeed, the May 2021 Executive Order already directed the FSOC to assess and collaboratively address climate-related impacts on US financial system stability. According to the Roadmap, the FSOC will soon publish a report as “the first step in a robust process of US financial regulators developing the capacity and analytical tools to mitigate climate-related financial risks.”
From day one, the Biden Administration has stressed that addressing the climate crisis is at the top of its agenda. The Roadmap is the Administration’s latest — but likely not the last — bold move to steer the US toward climate risk resilience with the end goal of integrating climate risks “throughout all relevant aspects of the economy and financial system.”
For information on a parallel EU effort, see Latham’s post European Commission Releases Legislative Package to Meet Emissions Target.