US government takes action on Climate Risk Disclosure

April 22, 2021
By CSE

COVID-19 has posed a global risk to domestic financial institutions and as the pandemic continues to evolve, US has confirmed that climate change is one of the top priorities. Even before the pandemic, the increased volume of extreme climate phenomena has caused considerable uncertainties in investing and the shift away from carbon-intensive energy sources may result in transition risks to many sectors.

Voluntary standards already exist, but insufficient data and tools remain a critical constraint. Moreover, companies’ methodologies for calculating those risks are inconsistent. The time has come for potential mandatory regulations to require companies to disclose their actions and exposure to global warming.

Why is climate risk disclosure so important?

Failure of disclosure may result in poor investment decisions and asset losses, as investors cannot have a complete view of the market.

Each sector and company may differ in approach, but the most important key points for a successful climate risk disclosure remain the same. Every disclosure should be transparent and clarify the key assumptions and methods that have been used.

The US government calls the federal agencies to take immediate action in order to combat climate-related financial risks to the economy. The target is to enhance U.S. competitiveness and economic growth. The new regulations that are likely to be imposed, will reach every sector, including banking and insurance, oil and gas, housing, agriculture, and federal contracting, purchasing and lending.

Recently, there have been many calls by investors and major asset managers, including BlackRock, requesting from the government to require climate disclosures, especially as they try to align their portfolios with the Paris Agreement.

The administration has already taken actions to reinforce the capacity of agencies, such as the Treasury Department, the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Reserve, in order to be able to address the climate risks on the financial system.

This is the first step of the administration’s efforts to reduce climate risks that threat financial stability and succeed the U.S. greenhouse gas emissions reduction.

How CSE can help companies and organizations tackle their climate risk disclosure

CSE is a leading ESG Consulting firm with sector-based integrated consulting services on Sustainability (ESG) from ESG Reporting and Ratings, Certification & External Assurance, to Impact Assessment and Strategic Planning.

For more than 14 years, CSE helps FORTUNE 500 and other organizations around the globe improve their ESG Ratings and maximize their social, economic and environmental impact.

To guide you securely into building or optimizing your Sustainability (ESG) strategy, CSE can provide coaching and practical tools.

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