President Biden Issues Federal Direction on Disclosure of Climate-Related Financial Risk

On May 20, 2021, President Biden issued his Executive Order on Climate-Related Financial Risk, stating that it is the policy of the Administration to “advance consistent, clear, intelligible, comparable, and accurate disclosure of climate-related financial risk….” The Order sets in motion the first steps toward development of a government-wide strategy on climate-related financial risk, and asks key federal agencies and financial regulators to embed climate risk considerations into virtually all aspects of government spending and oversight. In addition to centering the issue of climate disclosure squarely within the Administration’s broader objectives of strengthening the U.S. economy and financial system, the Order will further elevate the importance of government disclosure initiatives that are already underway, such as the Securities and Exchange Commission’s (SEC) request for public comment on climate disclosure. 


Climate risk disclosure has been an ongoing focal point for the Biden Administration, stemming from Biden’s initial campaign pledges to institute mandatory corporate climate reporting if elected President. Shortly after Inauguration, President Biden issued Executive Order 14008, Tackling the Climate Crisis at Home and Abroad, stating that “[t]he Federal Government must drive assessment, disclosure, and mitigation of climate pollution and climate-related risks in every sector of our economy, marshalling the creativity, courage, and capital necessary to make our Nation resilient in the face of this threat.” In recent weeks, actions in furtherance of this policy goal have primarily emerged from financial regulators, with the SEC seeking public input on climate disclosures and announcing that corporate disclosures of climate-related risks and opportunities will receive increased scrutiny. This Executive Order on Climate-Related Financial Risk decisively expands efforts aimed at analyzing and disclosing climate-related risks and opportunities across a number of different agencies, including the Treasury Department and the Commodity Futures Trading Commission (CFTC).

Meanwhile, pressure to reduce climate risk and limit fossil fuel investment continues to mount at the international level. On the same day the Executive Order was issued, the G7 agreed to halt international financing of coal projects. This followed on the heels of the International Energy Agency’s May 18 special report concluding that, in order for the global energy sector to reach net-zero emissions by 2050, there must be “no investment in new fossil fuel supply projects, and no further final investment decisions for new unabated coal plants.”


As outlined in the accompanying White House Fact Sheet, the Executive Order on Climate-Related Financial Risk aims to:

  • Develop a Whole-of-Government Approach to Mitigating Climate-Related Financial Risk. The Executive Order requires the National Climate Advisor and the Director of the National Economic Council to develop, within 120 days, a comprehensive government-wide climate-risk strategy to identify and disclose climate-related financial risk to government programs, assets, and liabilities.
  • Encourage Financial Regulators to Assess Climate-Related Financial Risk. The Executive Order encourages the Treasury Secretary, in her role as the chair of the Financial Stability Oversight Council (FSOC), to work with Council members to assess climate-related financial risk to the stability of the federal government and the stability of the U.S. financial system. The Order also asks the Treasury Secretary to work with FSOC member agencies (which include the Treasury Department, the SEC, and the CFTC) to issue a report, within 180 days, on recommendations to reduce risks to financial stability. The report will also include information on: current efforts by member agencies to incorporate climate-related risks into their regulatory and supervisory practices; recommended actions (including new or revised regulatory standards) by member agencies to incorporate consideration of climate-related financial risk into agency policies and programs; and discussion of the necessity to “enhance climate-related disclosures by regulated entities to mitigate climate-related financial risk to the financial system or assets[.]”
  • Bolster the Resilience of Life Savings and Pensions. The Executive Order directs the Labor Secretary to consider suspending, revising, or rescinding any rules from the prior administration that would have barred investment firms from considering environmental, social, and governance (ESG) factors, including climate-related risks, in their investment decisions related to workers’ pensions. The Order also asks the Department of Labor to report on other potential measures to protect the life savings and pensions of U.S. workers and families from climate-related financial risk, and to assess how the Federal Retirement Thrift Investment Board has taken ESG factors, including climate-related risk, into account.
  • Modernize Federal Lending, Underwriting, and Procurement. The Executive Order directs the development of recommendations for improving how Federal financial management and reporting can incorporate climate-related financial risk, especially as that risk relates to federal lending programs. It also requires consideration of new requirements for major federal suppliers to disclose greenhouse gas emissions and climate-related financial risks and to ensure that major federal agency procurements minimize those risks.
  • Reduce the Risk of Climate Change to the Federal Budget. The Executive Order directs the federal government to develop and publish annually an assessment of its climate-related fiscal risk exposure. It also directs the Office of Management and Budget to reduce the federal government’s exposure through the formulation of the President’s Budget and oversight of budget execution.

Implications for the Private Sector

  • Mandatory Rules on Climate Disclosure – This Executive Order further bolsters the SEC’s recent efforts to evaluate whether corporate disclosure rules should be expanded to explicitly cover ESG risks including those relating to climate. More specifically, the intra-governmental report to be issued pursuant to the Order will likely maintain or accelerate the SEC’s actions in response to its March 15 request for public comment on climate disclosure, discussed in this previous news alert.
  • Federal Procurement – The Executive Order calls on the Federal Acquisition Regulatory Council to consider amendments to the Federal Acquisition Regulation (FAR) that would require “major federal suppliers,” public and private, to disclose their greenhouse gas emissions and climate risks and set science-based reduction targets. Federal agencies would in turn use this information in their purchasing decisions, giving preference to bids and proposals from suppliers with a “lower social cost” of greenhouse gas emissions.
  • Standardization of Disclosure – As governments around the world continue to implement climate risk disclosure requirements, the push for a global standard under which to report will likely increase in order to harmonize the numerous voluntary standards that currently exist. In this regard, the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) continue to gain traction among governments and financial institutions and will likely inform the approach of mandatory disclosures in the U.S. and in other countries. In late April, Treasury Secretary Yellen identified the TCFD recommendations as “a solid framework for climate disclosures[,]” which may signal future influence of the standard on the Administration’s approach.

In the near term, companies can expect increased public and private scrutiny of current reporting practices, and may be called upon to demonstrate compliance with existing disclosure rules and guidance. Going forward, U.S. leadership as reflected in this Executive Order may serve as a model for other governments. As we move rapidly toward a potential race to the “top” in reporting and a complex body of global disclosure requirements to manage, companies should seize upon opportunities to contribute to the ongoing dialogue. The comment window for one such opportunity, the SEC’s Request for Comment on Climate Disclosures, is closing June 14, 2021.

Beveridge & Diamond’s ESG and Climate Change practice groups help clients navigate complex and interrelated legal and reputational issues in the fast-moving area of sustainability. Our experience and capabilities extend to: required or voluntary disclosures, interactions with sustainability rating agencies, supply chain and product stewardship, interactions with suppliers and customers, responsible sourcing, human rights, climate change law and policy, GHG emissions credit trading, environmental justice, facility issues, and more. For questions or for more information, please contact the authors.