Global sustainability policies are evolving rapidly. Here's what you need to know about ESG regulation
In the U.S., President Joe Biden has made climate change and environmental justice priorities of his administration. In the European Union, ESG regulations like the green taxonomy and the Sustainable Finance Disclosure Regulation (SFDR) are changing the way companies do business. S&P Global Sustainable1 tracks the trends, the costs and the outlook.
EU Taxonomy
The EU’s new Taxonomy Regulation is designed to support the transformation of the EU economy to meet its European Green Deal objectives, including the 2050 climate-neutrality target. As a classification tool, it seeks to provide clarity for companies, capital markets, and policy makers on which economic activities are sustainable. As a screening tool, it seeks to support investment flows into those activities.
At over 550 pages (with more to come), the EU Taxonomy can be daunting – even to the initiated. Read on for the basics.
Current timetable for completing the Taxonomy:
⦁ 31 December 2021: Deadline to adopt TSC for substantial contribution / DNSH to remaining four environmental objectives. Deadline for Commission to report on potential expansion of scope of the Taxonomy.
⦁ 01 June 2021: Commission deadline to adopt delegated act specifying content, presentation and methodology for Article 8 disclosures
⦁ 01 January 2022: Taxonomy’s Climate mitigation and climate adaptation requirements apply
⦁ 13 July 2022: Deadline for first review of the Taxonomy (required every three years).
⦁ 01 January 2023: Water & marine resources use and protection, circular economy transition, pollution prevention & control and biodiversity & ecosystems protection & restoration requirements apply
US ESG Policy
This piece is produced by S&P Global Sustainable1, S&P Global's single source of essential sustainability intelligence to navigate the transition to a low carbon, sustainable and equitable future.
Last week U.S. President Joe Biden issued an executive order that sets the stage for sweeping climate-related disclosure requirements and standards. At S&P Global Sustainable1, we view this as a necessary step to ensure the U.S. government is a taking an active role in helping the financial sector as well as companies, local governments and at-risk communities understand and address these growing risks.
Key goals of Executive Order on Climate-Related Financial Risk:
-
Develop a "comprehensive government-wide climate-risk strategy" to identify and disclose climate-related financial risks to the federal government and its assets as well as the broader U.S. financial system.
-
Identify public and private financing needs to achieve net zero emissions economywide by 2050.
-
Make financial regulators analyze climate-related threats to the U.S. financial system. The directive encourages Treasury Secretary Janet Yellen to work with members of the Financial Stability Oversight Council to recommend ways to reduce those climate-related risks to the U.S. government and the financial system, including how agencies plan to improve climate-related disclosures and data.
-
Find ways for private and public investments to play a role in mitigating the risks of climate change, “while advancing economic opportunity, worker empowerment, and environmental mitigation, especially in disadvantaged communities and communities of color."
-
Directs the Secretary of Labor to consider "suspending, revising, or rescinding" any Trump administration rules that would prohibit investment firms from considering ESG factors in their investment decisions for workers' pensions. The White House asked the Department of Labor to report on other measures that could protect savings and pensions from climate-related financial risks and assess how the Federal Retirement Thrift Investment Board has accounted for ESG factors.
-
Directs the Federal Insurance Office to look for gaps in the supervision and regulation of insurers and, in consultation with states, to assess the potential for climate change to cause major disruptions to private insurance coverage.
-
Requires recommendations for incorporating climate-related risks in financial management and reporting, particularly for federal lending programs. The administration will also consider new requirements for major federal suppliers to disclose their associated greenhouse gas emissions and climate-related financial risks.
-
The Office of Management and Budget will propose federal budgetary options to help the government assess and address the risks of climate change to its operations and to the U.S. financial sector.
Under Biden, nearly every agency — including financial regulators, the Environmental Protection Agency and the Federal Energy Regulatory Commission that oversees interstate pipelines and electricity markets — has taken steps to unwind environmentally harmful Trump-era rules and make community engagement a bigger priority.
But much of that agency-level work is in the early stages and will take years to carry out. And the price of transitioning to a greener, more just economy in line with Biden’s goals is likely to be steep.
Biden released sweeping executive order to address climate change, environmental justice
-
Pledges to dedicate 40% of federal investments in clean energy, clean water, clean transit, affordable and sustainable housing, training and workforce development and wastewater infrastructure to neighborhoods disproportionately affected by pollution
-
Directs the U.S. Environmental Protection Agency to develop an environmental justice enforcement strategy.
-
Creates an Office of Environmental Justice within the Department of Justice.
-
Creates a National Climate Task Force, White House Environmental Justice Interagency Council, and a White House Environmental Justice Advisory Council.
-
Creates an Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization.
Source: White House
Jan. 20
Biden signs executive orders to reenter U.S. into Paris Climate Agreement, review Trump actions that harm the environment and health
Jan. 25
Biden signs "buy American" executive order to boost medical supply chain, promote domestic development of clean energy technology
Jan. 26
Biden announces plan to buy 200 million more COVID-19 vaccines
Jan. 27
Biden signs order to put climate change at the center of U.S. domestic and foreign policy; order also paused new federal onshore and offshore oil and gas leases
Feb. 19
U.S. officially rejoins Paris Climate Agreement
Feb. 24
Biden signs an executive order launching a 100-day review of US supply chains for pharmaceuticals, critical minerals, semiconductors and large-capacity batteries
March 11
Biden signs American Rescue Plan Act, pumping a fresh $1.9 trillion into the economy
March 19
U.S. hits target 100 million COVID-19 vaccines administered ahead of Biden's target for shots during the first 100 days
March 31
Announcement of the $2 trillion American Jobs Plan and a proposed corporate tax hike to pay for it
April 15
Biden signs executive order naming the Russian Foreign Intelligence Service as the force behind SolarWinds cyberattack and blocking U.S. financial institutions from trading in Russian bonds
April 22
U.S. announces new nationally determined contribution under the Paris Agreement to cut U.S. greenhouse gas emissions by 50% to 52% below 2005 levels by 2030
April 22-23
Biden hosts Leaders Summit on Climate with representatives from 40 nations
As of April 26, 2021
Credit: Cat Weeks
Source: S&P Global Market Intelligence
Webinar
Following an unprecedented U.S. transition to power, President Joseph R. Biden, Jr. took the oath of office on January 20, 2021. How will the Biden Administration establish a strategic agenda, as the country looks to recover from an economic downturn, with a rising tide of COVID-19 and vaccination rollout? The Biden Administration’s first 100 days of the year will prove crucial to set the tone for the U.S. economy with implications for the global recovery.
Join us for insights on critical policy shifts, cross-sector business challenges, looming environmental and infrastructure legislation, plus analysis on government’s ability to build resilience against foreign and domestic crises, and restore U.S. competitiveness.
Speakers from S&P Global
Courtney Geduldig
Chief Public and Government Affairs Officer, S&P Global
Paul Grenwald
Global Chief Economist, S&P Global
Mona Naqvi
Senior Director, Head of ESG Product Strategy, North America, S&P Down Jones Indices
Further Reading
In his first 100 days in office, U.S. President Joe Biden made bold moves that keep sustainability issues at the heart of his regulatory and legislative agenda. Stay current with the implications of these decisions as the hard work now begins.
Biden's 1st 100 days: Businesses like econ moves but are eying taxes, regulation
1st 100 Days: New FERC chair eyes power market reforms, environmental justice
Biden's next 1,361 days – onshoring, not big deals; CMA CGM's high risk charge
Meet the regulator helping shape the next era of US corporate disclosures
