President Joe Biden on May 20 announced new steps to safeguard the U.S. economy from the financial risks of climate change.

Biden issued an "Executive Order on Climate-Related Financial Risk" that will require the development of a "comprehensive government-wide climate-risk strategy" to identify and disclose climate-related financial risks to the federal government and its assets.

The plan, due within 120 days, will be crafted by National Climate Adviser Gina McCarthy and the director of the National Economic Council, Brian Deese. It will identify public and private financing needs to achieve net-zero emissions economywide by 2050, the White House said in a fact sheet on the order.

In addition, the order seeks to have 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 assess climate-related financial risk to the stability of the federal government and U.S. financial system. Yellen could then issue a report within 180 days on recommendations to reduce those risks, including potential plans by member agencies for improving climate-related disclosures and data sources.

The order also directs the Secretary of Labor to consider "suspending, revising, or rescinding" any Trump administration rules that would prohibit investment firms from considering environmental, social and governance factors, including climate-related risks, in their investment decisions for workers' pensions.

The White House asked the Labor Department 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.

Furthermore, the order requires recommendations for incorporating climate-related risks in financial management and reporting, particularly for federal lending programs. As part of that provision, the administration will consider new requirements for major federal suppliers to disclose their associated greenhouse gas emissions and climate-related financial risks to ensure agency procurements minimize those threats.

The order also seeks to safeguard the federal budget from increased costs and lost revenue from climate change. Under the directive, the federal government must annually assess its climate-related fiscal risk exposure and publish those findings. In addition, the Office of Management and Budget must work to reduce the federal government's climate exposure through the formation and execution of the president's budget.

During a press call, McCarthy said the order sends a signal to the private sector and will help people understand such climate-related risks as they make investment decisions. And Deese told reporters that the action marks a "pivotal moment for the U.S. government."

"It marks a whole of government commitment to both identify and also act to mitigate the serious financial and economic risks posed by climate change," Deese said. "Our modern financial system was built on the assumption that the climate was stable, and that assumption has largely dominated existing financial models, and it's underpinned the way that we invest capital, the way that we have built society, and the way that we have forecasted for the long term. And today it's clear that we no longer live in such a world."

While acknowledging the role some companies and organizations have played in understanding and voluntarily disclosing climate risks, McCarthy noted that such disclosures cannot be optional.

"The stakes are simply too high," McCarthy said. "The federal government has to lead by example in its own operations, and we need to require the same level of responsibility from those we do business with. This comes down to responsibility and being honest with one another about the challenges that we face."

The May 20 order is the latest in a series of climate actions Biden has taken since entering office in January. The president has made climate change a focus of his administration, which is calling to decarbonize the power sector by 2035 as part of the broader 2050 net-zero goal.