Transition Risk

Biden’s First 100 Days: What Can We Expect on Climate?

The Biden administration has made climate change a key policy priority with a host of high profile announcements. Coupled with regulatory changes, it will be important for risk professionals to monitor for legal and policy changes – this is climate "transition" risk in the making.

Wednesday, March 17, 2021

By Jo Paisley

With US President Joe Biden settling into office, climate change is among the areas where changes in policy are likely to be most pronounced. At around the midway point of Biden’s first 100 days as president, what has been achieved so far and what might we expect?

Hours after being sworn in, Biden signed an Executive Order to "supercharge” the administration’s plans to confront the “existential threat of climate change.” This has many parts, which signals a significant change in direction for the US.

Jo headshotJo Paisley

First, it began the 30-day process for the US to re-enter the Paris Agreement. The US had left the agreement in 2020, the first nation ever to withdraw, but became an official Party to the Agreement on February 19th. This will entail the US developing its Nationally Determined Contribution (NDC) – that is its voluntary pledge to cut greenhouse gas emissions – that will be scrutinized along with other nations’ updated NDCs at the so-called COP 26 meeting in Glasgow in November 2021. We can expect to learn more at the Leaders’ Climate Summit that will be hosted by the President on April 22, coinciding with “Earth Day,” when events are often organized to demonstrate support for environmental protection, and which also is the fifth anniversary of the signing of the Paris Agreement.

The Executive Order aims to ensure that the risks from climate change are to be embedded in US Foreign Policy and National Security considerations. John F. Kerry was appointed as the US’s first Special Presidential Envoy for Climate and the first-ever Principal to sit on the National Security Council entirely dedicated to climate change.

Second, the Executive Order indicated that the Administration wants to embed Climate Change considerations throughout its work:

  • A White House Office of Domestic Climate Policy, charged with coordinating and implementing the President’s domestic climate agenda, will be led by Gina McCarthy in the newly-established role of National Climate Advisor.
  • She will chair a newly-established National Climate Task Force, comprising leaders from across 21 federal agencies and departments to enable a whole-of-government approach to combatting the climate crisis. Each federal agency will prioritize action on climate change in their policy-making and budget processes, contracting and procurement.

The Executive Order sets out new climate aspirations, including:

  • Achieving a carbon pollution-free electricity sector no later than 2035; with net-zero emissions, economy-wide, by no later than 2050.
  • Pausing new oil and natural gas leases on public lands or in offshore waters pending completion of a comprehensive review.
  • Establishing the goal of conserving at least 30 percent of US lands and waters by 2030.

The aspirations have already had tangible impacts, such as rescinding the permit for the Keystone XL oil pipeline.

Other appointees have signaled their commitment to tackling climate change. For example, Janet Yellen, appointed as Secretary of the US Department of the Treasury, promised to make climate change a primary focus of her tenure.

For financial firms, there has been a growing focus by the regulatory community on the financial risks from climate change, some of which pre-date the new administration. But the focus is definitely only going to increase. Kevin Stiroh has moved from his role as Head of the Supervision Group in the Federal Reserve Bank of New York to lead the US Federal Reserve’s supervisory work related to the financial risks of climate change.

Lael Brainard’s February 2021 speech provides some useful insights into how the Federal Reserve is considering how to incorporate climate-related risks into their supervisory framework. As she highlights, the Fed joined the Network for Greening the Financial System (NGFS) in December 2020, indicating how the US intends to collaborate internationally.

The US Securities and Exchange Commission (SEC) also recently announced that it intends to enhance its focus on climate-related disclosures in public company filings and will update its guidance in this area.

A final key area of policy – highlighted in the CFTC’s September 2020 report Managing Climate Risk in the U.S. Financial System – is how to price carbon emissions. And here it is clear of the direction of travel. The Biden administration has re-established the “Interagency Working Group” (IWG), which has been tasked with ensuring that the Social Cost of Greenhouse Gases estimates used by the US government reflect the best available science and work toward approaches that take account of “climate risk, environmental justice, and intergenerational equity.” So far, they have announced that a cost of carbon dioxide of $51 per ton should be used. But this is only an interim price reflecting what was previously agreed upon before the group was disbanded in 2017, and has just been adjusted for inflation.

But the IWG’s recently published Technical Support Document indicates that they believe that this is an underestimate as it fails to reflect the full impact of GHG emissions in three main ways: not reflecting that US interests are impacted by climate impacts abroad; questioning if a lower discount rate be used; and being based on outdated models.

At only halfway through the first 100 days, it is clear that the business and financial landscape for firms has changed significantly from a climate risk management perspective. It will be important for risk professionals to monitor for legal and policy changes – this is climate ‘transition’ risk in the making.


Jo Paisley is the Co-President of the GARP Risk Institute and a leading expert on climate risk management.

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