Earth Day: The Big Guns Are Out!

Happy Earth Day, Everyone!

The Biden Administration has announced a target of 50% GHG emissions rate reduction (from 2005 levels) by 2030. You can read the White House Fact Sheet here. This is great news – we now have a target. Some say this will enable the US to claim we are supporting our COP21 Paris Agreement goals, and will help the global economy to continue without raising the global temperature by more than 1.5C.

Will this be the case? Well…it’s a good first step to have a goal. And the attention of the US Federal Government.

Also, Janet Yellen, Secretary of the Treasury, has announced how standardized disclosure of climate related financial risk is important and she will be working with the SEC to figure that out (read more here – including a bit about UK policy). This is on the heels of an announcement earlier in April by Hester Pierce (of the SEC) contesting the wisdom of standards for ESG metrics (read more on that here). Them battles are brewin’ but I would say clarity and predictability are perennially sought by investors, and Federal guidance on how to prioritize ESG will be better than a wild west of competing standards, reporting mechanisms and otherwise.

Yellen endorsed the TCFD and will work with the IFRS and other entities that are working to harmonize reporting processes, so investors will have clarity and be able to compare claims. I think this is good for the industry and seeing as most of the reporting frameworks are made up of industry-wide volunteers working in a consensus-seeking manner, I anticipate that the results will be market-oriented and market-responsive, addressing various critiques of the SEC or Treasury even getting involved.

Any company now has a double imperative to address ESG: transition risk that the regulations will move toward disclosure and market risk that investors and other market actors will prioritize seeing into a company through ESG. So…have fun out there!

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