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Sullivan & Cromwell Discusses White House Roadmap to Address Climate-Related Financial Risk

On October 14, 2021, the White House issued a report entitled “A Roadmap to Build a Climate-resilient Economy.”[1]  The 40-page report was mandated by President Biden’s May 2021 executive order on “Climate-Related Financial Risk” (the “EO”)[2] and presents the Administration’s “roadmap for measuring, disclosing, managing and mitigating climate-related financial risk across the economy,” while “catalyzing public and private investment to seize the opportunity of a net-zero, clean energy future.”[3]  Guided by the five primary principles outlined in the report, the Administration’s government-wide climate-risk strategy involves six main work streams:

Although the report largely discusses actions already contemplated by the EO, such as a forthcoming report by the Financial Stability Oversight Council (“FSOC”) assessing climate-related financial risk and its impacts on the stability of the U.S. financial system, or previously announced regulatory initiatives, such as climate-related disclosure rules expected to be promulgated by the Securities and Exchange Commission (“SEC”), the report demonstrates the Administration’s continued focus on the physical and transition risks posed by climate change to the U.S. economy and financial system.

The White House Report

The report outlines five primary principles for addressing climate-related financial risk:

Based on these guiding principles, the report identifies the Administration’s implementation strategy to address climate-related financial risk.  This strategy involves efforts that track the six main work streams referred to above, each of which is discussed in more detail below.

Promoting the resilience of the U.S. financial system to climate-related financial risk

The report cautions that climate-related risks present a “uniquely complex set of risk management challenges” because climate change affects “a wide range of sectors, geographies and assets across the United States.” Its complexity challenges “traditional notions of risk diversification,” makes “historical patterns less useful for financial risk assessment and management” and will require the development and use of “forward-looking assessments.”  In light of these risks, the report stresses that the federal government, including financial regulators, has “critical responsibilities in safeguarding the U.S. financial sector and addressing climate-related risks to the economy.”  The report highlights several regulatory initiatives aimed at safeguarding the U.S. financial system against climate-related risks, including:

Protecting life savings and pensions from climate-related financial risk

The report highlights, among other climate-related efforts by the Department of Labor (“DOL”), a recent DOL proposed rule, which would make it clear that employee benefit plan fiduciaries may consider climate change and other environmental, social and governance (“ESG”) factors when making investment decisions and exercising shareholder rights.[6]  According to the report, the proposed rule, if finalized, would bring the United States into close alignment with other countries, such as the United Kingdom, the European Union and Japan, which have already taken steps to incorporate climate change into retirement plan management.  The report further notes that the DOL will submit a report to the President in November 2021 with an update on its efforts to address climate-related financial risk to retirement and pension plans.

Using federal procurement to address climate-related financial risk

The report notes that the federal government, as the world’s largest purchaser of goods and services, has an obligation to be “a leader and model contracting partner,” and that public procurement can “shift markets, drive innovation, and be a catalyst for new global standards.”  According to the report, the Federal Acquisition Regulatory (FAR) Council is exploring two amendments to the federal procurement regulations in order to better disclose and mitigate the risks climate change poses to federal contracting.  First, the FAR Council is exploring an amendment to expand disclosure of greenhouse gas emissions in federal contracting and set science-based emissions reduction targets.  Second, the FAR Council is considering requiring federal agencies to consider a supplier’s greenhouse gas emissions when making procurement decisions and to give preference to bids from suppliers with lower emissions.[7]

Incorporating climate-related financial risk into federal budgeting and financial management

The report notes several initiatives to incorporate climate-related financial risk into federal budgeting and financial management, including steps being taken by the Office of Management and Budget (“OMB”) and the Federal Accounting Standards Advisory Board to further develop robust climate-related risk assessment and disclosure requirements for federal agencies.  In addition, the report notes that the President’s budget for fiscal year 2023 will include an assessment of the federal government’s climate-risk exposure and impacts on the long-term budget outlook, among other assessments.

Incorporating climate-related financial risk into federal lending and underwriting

The report highlights recent efforts by the Departments of Housing and Urban Development (“HUD”), Veterans Affairs (“VA”) and Agriculture (the “USDA”) to enhance their respective federal underwriting and lending program standards to better address climate-related financial risk to their loan portfolios, including the following:

Building resilient infrastructure and communities 

The report outlines multiple federal agency and interagency initiatives that aim to improve the climate resilience of U.S. government facilities and operations, financial-sector critical infrastructure, and communities, including the Federal Emergency Management Agency’s efforts to update its National Flood Insurance Program’s standards to better align with the current understanding of flood risk and flood risk reduction approaches and the development by Treasury Department’s Office of Cybersecurity and Critical Infrastructure Protection of a risk management program to analyze linkages between climate change-related risks and operational impacts to the financial sector.


The report outlines the Biden Administration’s “whole-of-government” implementation strategy to address climate-related financial risk and indicates that financial regulators and the federal government will play an increasingly important role in the implementation of the Administration’s climate-risk strategy.  As the SEC, the financial regulators and other governmental agencies become increasingly focused on climate-related disclosures and financial risk management, companies, particularly SEC registrants, financial institutions (which will have responsibilities for their customers), and federal government contractors, should consider evaluating their existing approach to climate risks and opportunities and prepare to adapt to major climate-related regulatory and market developments in the coming years.


[1]           White House, A Roadmap to Build A Climate-Resilient Economy (October 14, 2021), available at

[2]           Executive Order 14030, Climate-Related Financial Risk (May 20, 2021), available at

[3]           Net-zero generally refers to a state where anthropogenic emissions of greenhouse gases to the atmosphere are balanced by anthropogenic removals over a specified period.  See, e.g., the definition of “net zero emission” on the website of Intergovernmental Panel on Climate Change (IPCC), available at

[4]           Federal Insurance Office Request for Information on the Insurance Sector and Climate-Related Financial Risks, 86 Fed. Reg. 48814 (August 31, 2021), available at

[5]           The new rule is anticipated to be a major change from the SEC’s existing principles-based approach, set out in its 2010 guidance on climate-risk disclosure, which does not mandate disclosure of any specific climate-related metrics and requires companies to disclose information about climate change’s potential or actual impacts on the company to the extent material to the investors.  See our Client Memorandum, date March 19, 2021, “SEC Focuses on Potential Updates to U.S. Climate Change Disclosure Requirements,”, available at

[6]           Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights (Proposed Rule), 86 Fed. Reg. 57272 (October 14, 2021), available at  The proposed rule follows the EO’s direction and proposes to reverse two rules promulgated under the Trump Administration that have created a perception that fiduciaries are at risk if they include any ESG factors in the financial evaluation of plan investments.

[7]           In October 2021, the Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration published an advance notice of proposed rulemaking to seek public input on the proposed amendment to the federal acquisition regulation.  Federal Acquisition Regulation: Minimizing the Risk of Climate Change in Federal Acquisitions (Advanced Notice of Proposed Rulemaking), 86 Fed. Reg. 57404 (October 15, 2021), available at

[8]           In November 2020, HUD published a proposed rule to amend FHA regulations to allow mortgagors the option to purchase private flood insurance on FHA-insured mortgages for properties located in Special Floor Hazard Areas.  Acceptance of Private Flood Insurance for FHA-Insured Mortgages (Proposed Rule), 85 Fed. Reg. 74630 (November 23, 2020), available at

This post comes to us from Sullivan & Cromwell LLP. It is based on the firm’s memorandum, “White House Issues Roadmap to Address Climate-Related Financial Risk,” dated October 18, 2021.

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