Having laid out climate-related policies in 2022, federal regulators are tasked in 2023 with putting them into effect. How successful they are will decide in part what impact the warming planet will have on the U.S. and global economies.
Last year was the “year of proposing and planning,” and in 2023, “we should reap the benefits,” Todd Phillips, Founder of Phillips Policy Consulting LLC, told E&E News.
In 2022, the Securities and Exchange Commission (SEC) outlined three key rules that will be finalized and established after thousands of submitted comments are addressed. The first rule would revamp corporate disclosure measures, requiring that public companies reveal their greenhouse gas emissions, climate-related risks, plans, and strategies.
The second and third rules determine how investment products are deemed green, sustainable, or ESG funds. As public demand for such climate-conscious investments has increased, firms have hurried to categorize products as such, calling into question whether the labels are just slapped on to attract customers.
Though it’s expected that the rules will be enacted in 2023, the volume of feedback the SEC has received may hold up the process. Many investors, outside organizations, and Democratic lawmakers are in favor of the rules, but opponents may file legal challenges that could delay implementation even after the rules are approved.
“I don’t see that slowing down,” said Kristina Wyatt, Senior Vice President of Global Regulatory Disclosure at carbon accounting company Persefoni, Inc. Wyatt is a former Senior Counsel for Climate and Environmental, Social, and Governance at the SEC.
Also in 2022, the three main banking regulators proposed similar guidance for how major U.S. banks need to manage their exposure to climate change. The Federal Reserve, Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corp. (FDIC) are in the process of working through the comments they each received.
The FDIC made clear that climate change poses a “clear and significant risk to the U.S. financial system and, if unmitigated, may pose a near-term threat to safe and sound banking and financial stability.”
The Fed said it is also requiring the country’s six largest banks to undergo first-ever testing of how prepared they are to weather potential climate risks. Such “pilot climate scenario analysis” would end in late 2023, according to the Fed.