After a significant legal win in Texas for President Biden’s ESG rule and new climate-related disclosure legislation in California, the outlook for sustainable investing seems to have improved substantially in the past month.
Welcome back to the Climate Nexus finance newsletter – a regular update that looks at the big stories and players at the intersection of climate change, finance, regulation, and energy, with tips for the week ahead.
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Big wins for sustainable investing
After a significant legal win in Texas for President Biden’s ESG rule and new climate-related disclosure legislation in California, the outlook for sustainable investing seems to have improved substantially in the past month. Democratic congressional members are now stepping up pressure on the SEC and Commissioner Gary Gensler to advance the agency’s regulatory agenda, particularly the long-awaited climate disclosure rule, which is expected (like Godot) before the end of the year. Meanwhile, House Financial Services Committee Republicans used an SEC oversight hearing last week to spread disinformation about the fictitious burdens on small businesses and the associated compliance costs should the rule advance. A new report from InfluenceMap details a concerted campaign by fossil fuel, financial, and other lobbying groups to stop climate-related financial regulation. With the disclosure rule just around the corner, it’s not clear that everyone has done their homework. Many global firms do not seem ready for mandatory climate disclosure.
Climate change is burning a hole in your wallet
Following Janet Yellen’s new climate guidelines issued last month, the Treasury released a new report detailing the implications of climate change on American household finances. It underscores the economic challenges posed by climate events, highlighting that while all households face risks, specific demographics, such as outdoor workers, single-parent households led by women, and lower-income households, are more vulnerable. Climate hazards, including floods, wildfires, and extreme heat, are shown to compromise income, increase living costs, and create disruptions in accessing essential financial services. With half of U.S. counties facing heightened future exposure to at least one major climate hazard, the report recommends a proactive approach, urging policymakers to enhance public awareness, invest in infrastructure to build physical resilience, and support households in developing financial resilience. Government hurrying up and incorporating climate risks into financial regulations, procurement, and their own spending would help too.
Dirty coal insurers
Insurance companies that pledged to reduce coal coverage are still fueling the fire. Just five insurance companies—AIG, Liberty Mutual, Lloyd’s of London, Swiss Re, and Zurich—covered 41% of U.S. coal production in 2022, according to a report from Public Citizen and Insure Our Future. Several insurance companies, including those that have stopped insuring homes due to climate risk, are violating their own coal coverage policies by insuring coal despite net-zero pledges. As insurance companies exploit loopholes and disregard public commitments, Americans are calling on insurers to put an end to the hypocrisy.
A better World Bank, not just a bigger one
The World Bank and the International Monetary Fund (IMF) annual meetings are next week, October 9–15, in Marrakech, Morocco. The IMF just approved a new $1.23 billion climate resilience loan for the country, which it had requested before the devastating earthquake. Once barely getting a mention, climate is now the focus of dozens of official events, particularly for the World Bank, which is facing pressure from donors to rapidly increase financing for climate resilience. President Biden has explicitly called the World Bank an important counter to Chinese lending, but many borrower countries want a better bank, not just a bigger bank. While the new World Bank President Ajay Banga is broadly supportive of expanding the bank’s mandate to address climate and development in tandem, next week’s meetings will test whether rhetoric can become reality. As for civil society’s response, actions have been planned throughout the week, including a counter summit and mass march on the 12th, culminating in a Day of Action on the 13th to demand an end to fossil fuel financing.