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US leads world in making public finances resilient to climate change

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2013 flooding in Colorado led to the loss of 500 miles of roadway and more than 30 bridges. Here, U.S. 34 in Greeley is breached by the South Platte River in flood stage. Image via Flickr :usepagov
2013 flooding in Colorado led to the loss of 500 miles of roadway and more than 30 bridges. Here, U.S. 34 in Greeley is breached by the South Platte River in flood stage.Image via Flickr :usepagov

The US leads other major economies with its distinctive focus on integrating climate change into economic management and public finances. It is also well ahead of other countries in taking serious measures to address the financial impact of physical climate risks.

WASHINGTON DC 

  • Last week the White House released a Roadmap for making the US economy resilient to climate impacts. The Roadmap includes numerous measures to integrate climate risk into federal financial management and budgeting, underwriting and loans. 
  • Today, a separate but connected report is released, constituting a roadmap for US climate-related financial regulatory reform
  • As the U.S. takes these first critical steps in reforming its economic and financial regulatory environment to reflect the realities of a warming planet, it is imperative that it continues to coordinate with other countries to establish new norms and create mutually intelligent frameworks that will reduce friction and fragmentation in the global financial system.

Story

In May 2021, President Biden issued an Executive Order that directed his administration to develop a strategy on macro-financial climate-related risks.  

The economy-wide Roadmap to Build a Climate-Resilient Economy is one of the first outcomes directly connected to this executive order. It includes numerous measures to integrate climate risk into federal financial management and budgeting, underwriting and loans.

This announcement comes at a crucial time, in the final period before the G20 and COP26 meetings where financial system reforms at international level will be under discussion. So far, few countries have been willing to take proactive steps to make their own public finances fully resilient to climate change. The US is sending a strong signal to other countries to catch up with this critical agenda and should work to embed these reforms internationally as well as at home.

Biden’s Executive Order also directed Treasury Secretary Janet Yellen to issue a report on existing efforts and recommendations for action by the Financial Stability Oversight Council (FSOC) to mitigate climate-related financial risks. That Roadmap, published today, will be the United States’ first, important step in directing its financial regulatory agencies to address climate-related risks.

Quotes 

Claire Healy, Head of E3G Washington DC office said:   

This is a big deal. The US broke poorly taking climate-related financial risks seriously; with the economic roadmap and FSOC report it has come from behind to be a front-runner. It is imperative that the US continues to work with international partners to set new norms, incentives and support structures to shift financial flows for faster decarbonization and a more resilient global economy. Time is of the essence.

Kate Levick, Associate Director, Sustainable Finance, said: 

With FSOC’s report the US takes a further step in creating financial regulation that enables economic resilience to climate change. Other countries are struggling to apply the same principles to public finance but the White House Roadmap demonstrates international leadership which other countries should replicate.

Taylor Dimsdale, Program Leader, Risk and Resilience, said: 

The Biden Administration understands that climate risk is a serious challenge for all countries, and the United States is no exception. These new plans will help the US build a more resilient economy and will reorient financial flows to deliver a safe climate.

Dileimy Orozco, Senior Policy Advisor, Macroeconomics, said:  

Understanding how climate risks impact on public finances is a first step in understanding the impact of climate on the wider economy; this will set a direction of travel for the us as a whole in building a strong economy. The US Federal Roadmap is a significant step forward, and the Biden Administration is not shying away from being bold and setting the pace of change in public finance disclosures.

ENDS 

Notes to Editors 

  • E3G is an independent climate change think tank accelerating the transition to a climate safe world. E3G specialises in climate diplomacy, climate risk, energy policy and climate finance. -> About 
  • For enquiries please email press@e3g.org or phone +44 (0)7783 787 863 
     

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