By Colleen Orr, Senior Policy Analyst, PRI
On the campaign trail, when President-elect Biden spoke to this year’s concurrent crises – systemic racism, coronavirus pandemic, natural disasters and the subsequent economic loss – he spoke directly to American families impacted by one or more of these issues every day. The election results confirmed that many Americans had those issues at the top of their minds when filling out their ballots.
For those who have entered the US workforce in the last decade, this year compounds the instability of the last financial crisis. This generation struggled to find employment while saddled with student loan debt or had parents lose jobs and drain savings to provide food for their family. Many of our worst environmental disasters occurred after 2008: the BP Deepwater Horizon oil spill, the Flint water crisis, two of the most damaging hurricanes on record, costing billions in damages and proving the financial impact of climate change.
As I write, the western United States continues to battle devastating wildfires, and for many states, 2020 marks the worst wildfire season on record. In California, six of the 20 largest wildfires occurred in August and September this year. My heart goes out to those who have lost loved ones or their homes while being exposed to wildfire smoke during a pandemic that attacks one’s ability to breathe. Partnership and support between the Federal government and states to address environmental and social issues through economic recovery is needed now more than ever.
President-elect Biden’s immediate priorities include addressing climate change through executive actions, such as requiring public companies to disclose climate risk and greenhouse gas emissions, and a commitment to spending on federal infrastructure projects that can increase climate resiliency and promote job growth. His platform also highlights local and state leadership in addressing climate change and climate initiatives that support local economies.
California sets example for federal government
As the world’s fifth-largest economy, California can set an example for the federal government in implementing a climate-focused economic recovery. For example, the state’s tailpipe vehicle emission standards had a ripple effect in the market when auto manufacturers designed cars to comply with California’s standard. Fourteen other states, the District of Columbia and Canada have also adopted the standard as their own, showing California’s influence on progressive policy across North America.
The growing momentum around ESG integration in investment practices in California is demonstrated by PRI’s 114 signatories with headquarters in the state. To highlight best practices and standards for sustainable finance in California, the PRI and the Climate Risk Initiative at UC Berkeley School of Law’s Center for Law, Energy & the Environment (CLEE) published the California Responsible Investment Roadmap. The California Roadmap, based on interviews with stakeholders and experts in the public and private sectors who already integrate ESG factors into their decision-making, also offers forty recommendations for policymakers to advance ESG integration in investment decision-making, and by extension throughout the state’s economy. The recommendations span across 7 areas for policy change: metrics, data-sharing, defining ESG; institutional investors; corporate governance and disclosure; state projects, procurement, and investment; state financing authorities; insurers and insurance regulators; and California’s goal of carbon neutrality by 2045.
The PRI and CLEE will use the findings in the Roadmap to seek decision-maker input on the top policy priorities to pursue next year in California. With leadership comes responsibility, and California can go further with policy opportunities to continue to advance ESG integration in the state. By doing so, it will support action at Federal level. The PRI continues to work with our growing signatory base, policymakers and regulators at the federal level to advance policies that support responsible investment: mandatory ESG disclosure from issuers, modernizing fiduciary duties for fiduciaries to integrate material ESG factors into investment process, and climate stress-testing of US financial institutions. In August, we published the report, “How government and investors can deliver net-zero in the US”, setting out priorities for US federal climate policy which are economically feasible, readily implementable, and necessary in six areas: overall climate ambition and governance, zero-carbon power, buildings, road transport, industry and land use. As the PRI’s Inevitable Policy Response project has demonstrated, a delay in implementing the policies necessary to transitioning our economy will result in an eventual policy response that is forceful, abrupt and disorderly, undermining the value of investments and potentially challenging the stability of the financial system.
In order to prevent further economic decline from this year’s concurrent crises, policymakers and regulators at the local, state and federal level must work together to incorporate climate change and ESG factors into their economic recovery plans. The PRI and its signatories will continue to advocate for policies that support responsible investment and address the systemic risks of climate change.
This blog is written by PRI staff members and guest contributors. Our goal is to contribute to the broader debate around topical issues and to help showcase some of our research and other work that we undertake in support of our signatories. Please note that although you can expect to find some posts here that broadly accord with the PRI’s official views, the blog authors write in their individual capacity and there is no “house view”. Nor do the views and opinions expressed on this blog constitute financial or other professional advice. If you have any questions, please contact us at email@example.com.