Priority: Doing Well by Doing Good
Beyond tackling the pandemic, one of President Biden’s next highest priorities is around promoting broad environmental, social and governance (ESG) initiatives.
On the environmental front, battling climate change has been a central pillar of President Biden’s campaign, starting with reentering the Paris Agreement hours after he took office through a series of executive orders that placed climate change at the forefront of domestic and foreign policy. President Biden has intrinsically tied his climate policy to his plan for economic recovery, promising a move towards a “Clean Energy Revolution.”
The Administration’s goals are lofty. Included in his $2 trillion proposed climate proposal are plans to:
- Eliminate fossil fuel emissions entirely from the energy sector by 2035 and in the economy more broadly by 2050.
- Reengineer old infrastructure to be able to endure the effects of climate change.
- Encourage electric vehicles and the system of charging stations that would keep them running.
- Expand zero-emission public transportation.
- Invest in eco-friendly buildings and housing construction.
- Improve sustainable agriculture practices.
- Develop new technologies for clean energy.
On April 21, during his Earth Day Climate Summit speech, President Biden went a step further, calling for the United States to cut emissions 50-52% from 2005 levels by 2030, as well as establish a federal climate task force to help achieve those targets.
In addition to the focus on climate change, the Biden administration has made it clear that it will embrace further mandatory regulatory requirements around ESG reporting broadly.
The first step for regulators will be deciding upon a reporting framework designed to provide more consistent, comparable, and reliable information for investors. Establishing the baseline will help businesses better understand, report, measure and track against key metrics more easily and consistently.
In March, the SEC launched a Climate and ESG Task Force in a concerted effort to encourage businesses to improve corporate practices around environmental, gender, racial and social issues. Consistent with increasing investor focus and reliance on climate and ESG-related disclosure and investment, the Task Force will also develop initiatives to proactively identify and address ESG-related misconduct.
The focus on ESG will only continue to increase—both in the public discourse as well as the in the eyes of regulatory watchdogs. Public sentiment around climate change, corporate ethics, diversity, equity & inclusion, worker health & safety, sustainability and other related issues are stronger than ever, and the momentum around ESG reporting is unlikely to reverse course.