The Biden administration issued a sweeping plan Oct. 15 outlining how the government will manage the threat of climate change for the U.S. financial sector and the millions of Americans who depend on it.

The White House said it will marshal financial regulations, federal lending power and the government's massive procurement system to protect critical retirement savings of 140 million Americans and homes that are increasingly exposed to extreme weather events.

"We are clear-eyed about how climate change poses a systemic risk for our economy," Bharat Ramamurti, deputy director of the National Economic Council, said during an Oct. 14 press briefing about the new strategy. "Protecting the American economy and the financial system from the risks and impacts of climate change is new territory for the government and today's report demonstrates how the U.S. intends to take a leading role in addressing this issue head-on."

The failure of a single financial firm can bring the entire economy to its knees, Ramamurti noted.

The White House strategy, to be developed in greater detail in the coming months, will include new climate risk disclosure rules mandates by the U.S. Securities and Exchange Commission, along with a push by the U.S. Department of Treasury to address risks in the insurance sector. Some initiatives are already underway.

A new rule proposed by the U.S. Department of Labor, for example, will allow fiduciaries representing more than 140 million Americans who participate in employer retirement saving plans and over $12 trillion in pensions and retirement savings to consider climate change when making investment decisions. The rule removes a controversial decision by the Trump administration that barred retirement managers from considering anything but financial benefits or risks.

The new rule will ensure fiduciaries "don't turn a blind eye to climate change and other factors," according to an administration fact sheet.

A systemwide approach

The U.S. government, the world's largest procurer of goods and services, also announced a new proposed rule Oct. 15 that directs large federal agencies such as the U.S. Department of Defense to minimize greenhouse gas emissions when making acquisitions. The government spent $650 billion on contracts in 2020.

The Federal Emergency Management Agency this week is expected to update its national flood insurance program to help existing and prospective property owners assess risks facing buildings in floodplains and coastal areas. A report from First Street Foundation warned that 25% of critical U.S. infrastructure is now at risk of getting flooded.

And starting in 2023, the administration will for the first time include an assessment in its proposed federal budget on climate risks facing government agencies.

Over the past five years, extreme weather events have cost Americans $640 billion in damages and caused nearly 4,000 deaths, data from the U.S. National Oceanic and Atmospheric Administration's National Centers for Environmental Information shows.

"This will be the start of a very thoughtful process to look at how our systems are impacted by climate change," Gina McCarthy, the White House national climate adviser, told reporters. "Very few other governments have undertaken anything like this."

A new report kicking off the administration's new road map for a climate-resilient economy will be followed in the coming weeks by one from the Financial Stability Oversight Council outlining how America's financial regulators and institutions will address climate change. The new SEC climate disclosure rules will be next.

There will be other announcements through the rest of the year on actions federal agencies are taking to disclose and mitigate risks, White House officials said.

The U.S. departments of Housing and Urban Development and Veterans Affairs, for example, will begin to incorporate climate-related financial risks into federal lending and underwriting programs for single-family home mortgages.

"It's our view that these disclosures will better allow homeowners to make more appropriate decisions about their purchases," said Clare Sierawski, a special assistant to the president on climate change finance.

Veterans Affairs alone has nearly $913 billion in outstanding home loans to U.S. military veterans.