The World’s Eyes on the USA as FSOC Agencies Engage on Climate Risk

October 31, 2021 – As The Family of Nations gathers for COP 26 climate talks in Glasgow – the USA is back at at the table. 

What is President Joe Biden and the American delegation bringing with them to Scotland?  A big announcement from the White House just a few days ago that signals “we are serious”. Especially in regulatory and financial matters.

by Hank Boerner – Chair & Chief Strategist – G&A Institute

The gathering of the family of the world’s nations in Glasgow, Scotland for “COP 26” (the annual UN climate summit) is at hand!

There has been an increasing flow of news and opinion related to the big event as the United Nations, almost 200 sovereign governments, NGOs, corporations, and other constituencies announce a widening range of developments related to the summit now underway

In the United States, a significant announcement came in October as the Federal government’s FSOC – the Financial Stability Oversight Council “engaged on climate change”.

We’re sharing the important background with you:

You may recall that in May 2021, soon after taking office, The Biden-Harris Administration detailed the policies and actions of its “whole of government” approach to climate change in the “U.S. Climate-Related Risk Executive Order” (the “EO”) originally issued in May 2021.

The EO set out the federal government’s climate risk accountability framework and the implementation strategies for the “whole of government” approach to climate-related financial risk.

Think about the agencies affected by the EO: NASA; DoD; Labor; Interior; HHS; Education; the Federal Acquisition Council (considering GhG emissions when making buying decisions)…and many more.

The policies in the EO and in then implementation steps by Federal agencies are again in public view as President Joe Biden prepared to participate in the COP 26 meetings.

The White House reminded us of EO 14030 in a news announcement (“A Roadmap to Build a Climate-Resilient Economy”) on October 14th.

This was the backdrop for the announcement from the powerful FSOC via U.S. Treasury Department for planned measures to protect retirement plans, homeowners, consumers, businesses and supply chains, workers, and the federal government from the financial risks of climate change.

Policies and actions were outlined for us as the FSOC on October 21 at identified climate change as an emerging and increasing threat to financial stability.

To review: there are six important “workstreams” in the Federal government’s framework to address climate-related financial risk:

• Protecting the resilience of the U.S. financial system.
• Protecting life savings and pensions.
• Using Federal procurement (federal agencies are the largest buyers of goods and services in the nation).
• Incorporating the risks into Federal lending and underwriting.
• Incorporating the risks into the Federal financial management and budgeting.
• Building resilient infrastructure and communities.

In the historic May 2021 EO “financial regulation” was among the issues addressed; now we are seeing the implementation plans of the government’s Financial Stability Oversight Council (the FSOC), the member group of key regulators as the agencies of the council spell out approaches to engagement on climate change issues.

Important: the work of the regulatory agencies in the FSOC affects many aspects of the American society: the Federal Reserve System and 12 district banks; Department of Treasury; the Office of Comptroller of Currency (OCC), part of Treasury that regulates national banks; Securities & Exchange Commission (SEC); Commodity Trading Futures Commission (CTFC); and, Federal Housing Finance Agency (FHFA).

The FSOC’s new report demonstrates the Council’s and member Federal agencies’ commitment to building on and accelerating existing efforts on climate change through “concrete recommendations” to the individual member agencies.

In our conversations with corporate managers and investment professionals we often explain that after the 2008 financial crisis, the member nations of the G20 came together to address financial risk matters in the new Financial Stability Board (FSB). This is a “think tank” approach to developing policies that each G20 nation can bring back to their regulatory agencies for consideration.

The FSB created the TCFD (Task Force for Climate-related Financial Disclosure), chaired by Michael Bloomberg. Important to keep in mind: the representatives to the FSB are the Secretary of the Treasury; the Federal Reserve chair; and, the SEC chair.

Each of those regulatory agencies and their leaders are members of the Federal government’s Financial Stability Oversight Council.

Commenting on the latest developments at FSOC, former Federal Reserve chair, now Secretary of Treasury Janet Yellen noted: the FSOC report puts climate change squarely at the forefront of the agenda of [Council member agencies] and is a critical first step forward in addressing the threat of climate change…it will by no means be the end of this work…”

We share the important documents related to these development as President Joe Biden and his delegation start their conversations at COP 26. 

Top Story/Stories

U.S. Financial Stability Oversight Council Engages on Climate Change
https://home.treasury.gov/news/press-releases/jy0426

Secretary of Treasury Janet Yellen Comments
https://home.treasury.gov/news/press-releases/jy0424

From the White House: Executive Order #14030
https://www.whitehouse.gov/wp-content/uploads/2021/10/Climate-Finance-Report.pdf




Dangerous Antics – Fiddling with the Future of US EPA and the Health and Safety of the American People

by Hank Boerner – Chair & Chief Strategist, G&A Institute

The Trump Administration  — Making moves now on the US EPA to destroy its effectiveness through budget cuts and ideological attacks on its missions.

In his landmark work published in 1993 – “A Fierce Green Fire – The American Environment Movement” – former New York Times journalist Philip Shabecoff explained:  the U.S. Environmental Protection Agency was created by President Richard Nixon (a Republican) in December 1970 (two years into his first term) as part of an overall re-organization of the Federal government. The EPA was created without any benefit of statute by the U.S. Congress.

Parts of programs, departments and regulations were pulled from 15 different areas of the government and cobbled together a single environmental protection agency intended to be the watchdog, police officer and chief weapon against all forms of pollution, author Schabecoff explained to us.

The EPA quickly became the lightning rod for the nation’s hopes for cleaning up pollution and fears about intrusive Federal regulation.

As the first EPA Administrator, William Ruckelshaus (appointed by Richard Nixon) explained to the author in 1989: “The normal condition of the EPA was to be ground between two irresistible forces: the environmental movement, pushing very hard to get [pollution] emissions no matter where they were (air, water)…and another group on the side of industry pushing just as hard and trying to stop all of that stuff…” Both, Ruckelshaus pointed out, regardless of the seriousness of the problem.

We are a half-century and more beyond all of this back and forth, and the arguments about EPA’s role and importance rage on.

Today we in the sustainability movement are alarmed at the recklessness of the Trump White House and the key Administration officials now charged with responsibility to protect the environment and public health in two key cabinet departments: The EPA and the Department of Energy.

The ripple effects of the attacks on climate change science are in reality much larger: The Department of Defense (which has declared climate change to be a major threat long-term); the Department of Interior, overseeing the nation’s precious legacy of national parks and more; the Department of Agriculture (and oversight of tens of millions of acres of farmland); the Department of Commerce; the Department of Justice..and on and on.

The destruction could start early: The Washington Post (with its ear to the ground) is closely watching the administration and reported on February 17th that President Donald Trump planned to target the EPA with new Executive Orders (between two and five are coming) that would restrict the Agency’s oversight role and reverse some of the key actions that comprise the Obama Administration legacy on climate change and related issues.

Such as: rolling back the Clean Energy Plan (designed to limit power plant GhG emissions), which required states to develop their own plan as well. And, withdrawing from the critical agreement reached in Paris at COP 21 to limit the heating up of Planet Earth (which most of the other nations of the world have also adopted, notably China and India).

The destroyers now at the helm of the EPA also don’t like the Agency’s role in protecting wetlands, rivers etc. (The Post was expanding on coverage originally developed by investigative reporters at Mother Jones.)

Mother Jones quoted an official of the Trump transition team: “What I would like to see are executive orders implementing all of President Trump’s main campaign promises on environment and energy, including withdrawal from the Paris climate treaty.”

And, in the Washington Post/Mother Jones reportage: “The holy grail for conservatives would be reversing the Agency’s ‘so-called endangerment finding,’ which states that GhG emissions harm public health and must therefore be regulated [by EPA] under the Clean Air Act.”

Think about this statement by H. Sterling Burnett of the right-wing Heartland Institute: “I read the Constitution of the United States and the word ‘environmental protection’ does not appear there.” He cheered the early actions by the Trump-ians to give the green light to the Keystone Pipeline and Dakota Access Project.

On March 1st The Washington Post told us that the White House will cut the EPA staff by one-fifth — and eliminate dozens of programs.

A document obtained by the Post revealed that the cuts would help to offset the planned increase in military spending. Cutting the EPA budget from US$ 8.2 billion to $6.1 billion could have a significant [negative] impact on the Agency.

We should remember that in his hectic, frenetic campaigning, Donald Trump-the-candidate vowed to get rid of EPA in almost every present form – and his appointee, now EPA Administrator (Scott Pruitt) sued EPA over and over again when he was Attorney General of Oklahoma, challenging its authority to regulate mercury pollution, smog (fog/smoke), an power plant carbon emissions (the heart of the Obama Clean Energy Plan).

In practical terms, the Post explained, the massive Chesapeake Bay clean up project, now funded at $73 million, would be getting $5 million in the coming Fiscal Year (October 1st on). Three dozen programs would be eliminated (radon; grants to states; climate change initiatives; aid to Alaskan native villages); and the “U.S. Global Change Research Program” created by President George H.W. Bush back in 1989 would be gone.

Important elements of the American Society have tackled conservation, environmental, sustainability and related issues to reduce harm to human health and our physical home – Mother Earth – over the past five decades: Federal and state and local governments; NGOs; industry; investors; ordinary citizens; academia.

Today, the progress in protecting our nation’s resources and human health made since rivers caught fire and the atmosphere of our cities and towns could be seen and smelled, is under attack.

The good news is that for the most part, absent some elements of society, the alarms bells are going off and people are mobilizing to progress, not retreat, on environmental protection issues.

American Industry – Legacy of Three Decade Commitment to Environmental Protection – The Commitment Must Continue

The good news to look back on and then to project down to the 21st Century and Year 2017 includes  the comments by leaders of the largest chemical industry player of the day as the EPA was launched and key initial legislation passed (Clean Air Act, Clean Water Act, and many more)  – that is the DuPont deNemours Company.

Think about the importance of these critical arguments – which could be considered as foundational aspirations for today’s corporate sustainability movement:

Former DuPont CEO Irving Shapiro told author Philip Shabecoff: “You’ve have to be dumb and deaf not to recognize the public gives a damn about the environment and a business man who ignores it writes his out death warrant.”

The fact is, said CEO Shapiro (who was a lawyer), “DuPont has not been disadvantaged by the environmental laws. It is a stronger company today (in the early 1990s) than it was 25 years ago. Where the environment is on the public agenda depends on the public. If the public loses interest, corporate involvement will diminish…”

His predecessor as CEO, E. S. Woolard, had observed in 1989: “Environmentalism is now a mode of operation for every sector of society, industry included. We in industry have to develop a stronger awareness of ourselves as environmentalists…”

And:  remember, warned Dupont CEO Shapiro: “…if the public loses interest corporate involvement will diminish…”

Today let’s also consider the shared wisdom of a past administrator as she contemplated the news of the Trump Administration actions and intentions:

Former EPA Administrator Gina McCarthy (2013-2017) said to the Post: “The [proposed] budget is a fantasy if the Trump Administration believes it will preserve EPA’s mission to protect public health. It ignores the need to invest in science and to implement the law. It ignores the history that led to the EPA’s creation 46 years ago. It ignores the American People calling for its continued support.”

Consider the DuPont’ CEO’s comments above … if the American public loses interest.  At this time in our nation’s history, we must be diligent and in the streets (literally and metaphorically) protesting the moves of this administration and the connivance of the U.S. Congress if our representatives go along with EPA budget cuts as outlined to date.

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About “A Fierce Green Fire: The American Environmental Movement,” by Philip Shabecoff; published 1993 by Harper Collins. I recommend a reading to gain a more complete understanding of the foundations of the environmental movement.

A decade ago I wrote a commentary on the 100-year evolvement of the conservation movement into the environmental movement and then on to today’s sustainability movement in my Corporate Finance Review column.  It’s still an interesting read:  http://www.hankboerner.com/library/Corporate%20Finance%20Review/Popular%20Movements%20-%20A%20Challenge%20for%20Institutions%20and%20Managers%2003&04-2005.pdf