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The Insider

President-elect Joe Biden is poised to tighten a host of EPA regulations, but stakeholders including environmentalists and industry figures are preparing for changes that go far beyond one agency, including a first-time statement from the Federal Reserve System on climate risks to the financial sector and a push for stronger appliance standards at the Department of Energy.

Inside EPA’s Environment Next Insider summarizes our recent exclusive coverage of how Biden’s election could boost novel approaches to environmental protection, including through new regulatory approaches and an increased sustainability focus in financial markets.

Environment Next is a free service to our subscribers, featuring wide-ranging looks at coming developments for environmental protection and policy -- including interviews, in-depth reporting, and profiles of key figures, companies and other groups that are reshaping regulation and private governance on air, water, waste and climate change. The features offer a new way of reporting about the shift from command-and-control regulation to innovative, market-based measures and other efforts, including voluntary programs and government action outside EPA’s purview.

This week, we covered the Federal Reserve System’s new warning about climate risks to the financial system, which could boost the Biden administration’s efforts in that arena even though it only signals that the central bank would prefer disclosures rather than mandating them:

Federal Reserve Eyes Climate Risks, Boosting Disclosure Movement
Observers see the Federal Reserve System’s new report that lists climate change as a serious threat to financial markets as a sign that the United States’ central bank will step up research in the field, just as President-elect Joe Biden is looking for ways to bolster the overall federal response to climate change.

The most recent version of the Fed’s semiannual financial stability report, published Nov. 9 by its board of governors, is the body’s first publication to raise climate change as a financial risk and promises more research in the future.

“The Federal Reserve is evaluating and investing in ways to deepen its understanding of the full scope of implications of climate change for markets, financial exposures, and interconnections between markets and financial institutions. It will monitor and assess the financial system for vulnerabilities related to climate change through its financial stability framework,” the report says.

While it stops short of backing any specific regulatory measures, the climate section concludes with a warning to banks to step up their handling of climate risk, which could aid the ongoing push for firms to disclose their environmental impacts and exposure to climate-linked risk along with other financial data.

The statement comes as private-sector momentum for climate disclosures continues to build, thanks in part to the asset-management giant BlackRock making the subject a priority:

BlackRock’s Support May Boost Standardized Corporate ESG Disclosures
BlackRock, the world’s largest asset manager, is supporting “convergence” on a globally recognized approach to comprehensive sustainability reporting, potentially boosting momentum for the creation of unified global standards that corporations would use to report their environmental, social, and governance (ESG) performance to investors.

In a recent commentary, BlackRock says disclosure initiatives have been proliferating because “investors and other stakeholders need a clearer picture of how companies are managing sustainability today and planning for the future,” when climate change, biodiversity loss, water scarcity, and other environmental issues -- as well as diverse social equity concerns -- are expected to be major risks facing companies and their supply chains.

Proliferating disclosure initiatives, many of them overlapping, have “led to duplicative efforts by reporters and a lack of consistent and comparable data,” BlackRock writes in calling for a globally recognized framework and standards. “Ideally, these would be developed by those with domain expertise in the private sector and supported by public policy makers as they move to require more comprehensive corporate reporting,” BlackRock adds.

The commentary, “Sustainability Reporting: Convergence to Accelerate Progress,” offers BlackRock’s support for “convergence to achieve a globally recognized and adopted approach to comprehensive reporting” and expectations that, until convergence happens, companies should “accelerate their efforts to publish sustainability data and contextual information under existing frameworks and standards.”

Regardless of regulatory steps, advocates for private ESG investing see the sector getting a boost from Biden’s overall environmental policy agenda:

ESG Investments Might See Significant Boost Under Biden Administration
President-elect Joe Biden’s election victory is prompting environmental policy experts and others to predict a looming significant boost for environmental, social, and governance (ESG) investments as the incoming administration pursues climate change and other policies that will create a more favorable environment for sustainability.

In a Nov. 9 press release, “Biden victory heralds boom time for ESG investing -- here’s why,” Nigel Green, the CEO of deVere Group, an independent global financial consultancy with more than $10 billion under management, said the Biden administration “will usher in an unprecedented boom” for ESG investing.

ESG investing refers to the growing focus by many businesses to elevate sustainability and pollution reduction considerations in their investment decisions.

In contrast with President Donald Trump’s efforts to undo key Obama environmental policies, multiple experts say Biden’s administration will quickly pursue a sweeping climate-focused agenda, including new regulations that may be more durable than Obama-era measures, while also taking major “Day One” steps on climate via executive actions and policies aimed at making environmental justice a priority.

Meanwhile, energy-efficiency and environmental groups are pushing the Biden administration not to limit its climate regulation to EPA and instead use as many agencies as possible to achieve greenhouse gas reduction goals, including through new appliance energy-use standards:

Climate 21 Project Urges Biden DOE To ‘Rebuild’ Appliance Standards
A group of environmental policy experts including former Obama administration officials is outlining how the Energy Department (DOE) should “rebuild” its energy efficiency standards program, after years of conflict between the Trump DOE and energy conservation backers over the agency’s failure to update roughly two dozen standards.

The call surfaces in recommendations to DOE co-authored by former Obama administration climate and energy adviser Jason Bordoff, former DOE Senior Adviser Dan Utech, and Udai Rohatgi, the Obama DOE’s former assistant secretary for energy efficiency and renewable energy.

They are part of a sweeping proposal on climate policies for President-elect Joe Biden’s incoming administration, authored by 150 policy experts under the auspices of the Climate 21 Project.

“DOE’s appliance standards program is its most important regulatory mitigation tool,” the DOE recommendations state.

They also say the department should also begin rescinding or revising Trump-era updates to DOE’s “process rule,” which lays out guidelines for setting appliance standards. Critics fault the rule for requiring potential standards to clear a high bar for achieving energy use reductions, while also adding more hurdles to the rulemaking process for policies that do qualify.