It’s no secret that President Joe Biden is intent on using federal policy to advance his administration’s goal of a net-zero emissions economy by 2050. But that goal hasn’t just manifested in proposals related to obvious sectors such as energy and transportation. It’s also a key part of why the Securities and Exchange Commission (SEC) is now straying from its core mission by proposing new rules related to climate. 

On May 20, 2021, Biden signed his “Executive Order on Climate-Related Financial Risk,” an order that charged a number of federal agencies to assess climate risks as part of their future planning and policymaking. For example, the order required the Secretary of the Treasury and the Director of the Office of Management and Budget to assess “the measurement, assessment, mitigation, and disclosure of climate-related financial risk to Federal Government programs, assets, and liabilities in order to increase the long-term stability of Federal operations.”

By creating official administration policy to “advance consistent, clear, intelligible, comparable, and accurate disclosure of climate-related financial risk,” Biden catalyzed the mission creep now being pursued by the SEC. Put simply, these policies insert climate concerns into financial assessments, muddying the water for potential investors and jeopardizing investor returns by advancing policy goals unrelated to finance.

Consider, for example, language in the President’s order that addresses life savings and pensions. The order asks federal agencies to evaluate actions that could be taken under the Employee Retirement Income Security Act and the Federal Employees’ Retirement System Act to protect pensioners and other affected investors from “climate-related financial risk.”

In its March proposal, entitled “The Enhancement and Standardization of Climate-Related Disclosures for Investors,” the SEC largely mirrored the President’s May 2021 directive, requiring public companies to evaluate and report their direct and indirect impacts on climate. The Biden Administration clearly hopes to make climate change a top priority for financial institutions, but many of the climate change solutions it has put forth are matters for his agency with an environmental directive (i.e. the EPA) and Congress should decide. In a time when investors have lost $5 trillion in stock value and pensioners are rightfully worried about their future, now is not the time for federal agencies such as the SEC to stray outside their lane with costly and confusing new rules.

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