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Biden Presses for Climate Disclosures: Executive Order Explained

May 24, 2021, 8:46 AM

The White House has joined the growing chorus of private-market demands for U.S. companies to provide more robust and standardized information about the climate risks they face.

President Joe Biden last week issued an executive order laying out steps the government will take to better identify the financial risks that climate change poses to both government and private assets, and the broader economy. It marshals the government’s regulatory muscle and buying power to bring climate change to the forefront of companies’ attention and reduce greenhouse gas emissions.

The four-page executive order includes a directive for the Financial Stability Oversight Council, which includes the Securities and Exchange Commission, to come up with a plan to improve climate disclosures.

Though the order doesn’t mention the SEC by name, it underscores efforts already underway at the agency to improve how companies publicly report climate risks and other environmental, social, and governance issues.

1: What is FSOC’s role?

The White House has asked the FSOC to issue recommendations on how to boost climate disclosures and to report on challenges member agencies face adopting climate risk into their oversight work, among other actions.

Led by Treasury Secretary Janet Yellen, the council includes the SEC, the Federal Reserve, and the Federal Deposit Insurance Corporation among several other regulators.

Yellen said in a May 20 call with reporters that she would work with those agencies to improve climate-related financial disclosures so the government, regulated financial institutions, and investors alike have the data they need.

“Our pensions, our savings, our future livelihoods depend on the financial sector to build a more sustainable and resilient economy. We all need to have the best tools, the best data to make well informed decisions,” she said.

2: How does the SEC fit in?

The SEC is an independent agency, which gives it some flexibility in how it responds to presidential directives. But as an FSOC member, it’s expected to follow Yellen’s lead and act as the council sees fit.

The order directs the FSOC to compile a report that describes work the SEC and other agencies are doing on climate-related financial risk by November. The paper would include details about member agencies’ plans to enhance climate disclosures.

The order references the need for “consistent, clear, intelligible, comparable, and accurate” reporting in several areas that would fall under the SEC’s purview.

“The intensifying impacts of climate change present physical risk to assets, publicly traded securities, private investments, and companies,” the order said.

3: What’s the SEC doing already?

The SEC has prioritized improving public companies’ reporting on climate risk and other ESG matters, such as workplace diversity, since Biden took office.

In February, the agency dusted off 2010 commission guidance that pushes companies to give more robust disclosures in their annual 10-Ks and other public filings about climate change’s effects on operations.

Those disclosures are voluntary. But the SEC also is soliciting public feedback on potential mandatory climate risk reporting, among other ESG topics.

New SEC Chairman Gary Gensler’s first formal proposal on ESG reporting is expected after the public comment period ends next month.

4: What companies would be affected?

The order doesn’t specify how financial regulators would enhance or even mandate climate reporting, but it broadly asks the council to improve such disclosures among “regulated entities.”

Both publicly traded companies and privately held businesses could fall under the scope of the FSOC’s efforts, Brian Deese, director of the National Economic Council, told reporters.

Corporate disclosures about climate change and greenhouse gas emissions have been on the rise among S&P 500 companies, even before Biden took office. S&P 500 members making these disclosures in their 10-K filings with the SEC are diverse, with AT&T Inc., Chevron Corp., Gilead Sciences Inc., and PepsiCo Inc. among them.

The order also looks to potentially make climate-risk reporting a requirement for contractors and suppliers bidding for government work.

5: Can Biden mandate disclosures for all companies?

In short, no. The White House lacks direct authority over many of the independent agencies represented by the council, but it can apply pressure.

The order advances the president’s campaign pledge to require climate disclosures. The Biden administration views the current system of voluntary reporting as insufficient to protect investors, jobs, and the savings of everyday Americans.

Gina McCarthy, national climate adviser, acknowledged the work by companies and other organizations have put into developing metrics and reporting. “But it simply isn’t enough,” she said. “This cannot be optional. The stakes are simply too high.”

To Learn More:

To contact the reporters on this story: Amanda Iacone in Washington at; Andrew Ramonas in Washington at

To contact the editors responsible for this story: Michael Ferullo at; Jeff Harrington at