February 02, 2021
Talking Points Memo
Joe Biden claimed he would be the Climate President. Last week was the first time many concluded that he actually meant it. His slate of climate-focused executive actions, issued just one week after his inauguration, included many of the growing climate movement’s priorities. And throughout every corner of his administration, Biden has begun to choose highly-regarded allies of the environmental movement, leading to surprising praise from some left-wing corners of his coalition.
Perhaps even more importantly, it appears as though Biden believes that every Cabinet job, not just those with “environment” or “energy” in the name, should play an essential role in the fight against climate change. His nominees to the Departments of the Interior and Transportation have both stated clearly their commitments to climate action. On Wednesday, Biden announced that he would establish a National Climate Task Force, assembling leaders across 21 federal agencies and departments to enable a “whole-of-government approach” to addressing the climate emergency.
Biden is on the right track; every candidate for every position in the federal government must be assessed by their ability and willingness to pursue climate action using existing and not-yet-created powers. That means the assessment should be held up against all the powerful independent financial regulators, which between them have the power to significantly temper the climate crisis by cutting off funding to the fossil fuel industry and other companies driving it.
Take JPMorgan Chase. As the world’s largest funder of fossil fuels, the firm has provided $196 billion to fossil fuel companies just since 2016. Imagine the possibilities if the Federal Reserve and Office of the Comptroller of Currency respectively forced JPMorgan and its national banking subsidiaries like Chase Bank to hold enough extra capital to insulate them from the risks of their climate change-exacerbating assets? By forcing the banks to reckon with the real costs of their dirty investments the Federal Reserve and OCC would likely render these holdings entirely unprofitable.
Or look at BlackRock, the world’s largest asset manager and largest investor in fossil fuel companies. BlackRock’s nearly $9 trillion in assets includes $85 billion in coal companies with plans to grow. Yet despite its overwhelming global power, BlackRock still has not been designated as a systemically important financial institution (aka “too big to fail”) by the Financial Stability Oversight Council. Once designated, it would be subject to increased supervision and regulation and could be pressured or forced to take its capital out of carbon-producing assets.
While none of the financial regulatory agencies explicitly name climate protection as a goal, every regulator, from the chair of the Federal Reserve to the Treasury Department to the Commodity Futures Trading Commission, has a responsibility to protect financial institutions and the economy more generally from risk. What is causing more risk to the economy, both immediately and over the coming decades, than climate chaos? Biden’s appointees to these agencies need to have this issue front of mind. Indeed, a prerequisite for 21st century leadership across the board should be the ability to creatively harness the power of the federal government to tackle the climate crisis we all face.
To this end, the new Democratic-majority Senate must assess any financial regulatory appointee through climate-tinted lenses.
Organizers thinking about this issue, like Stop The Money Pipeline (a coalition of which our organization is a member), have already developed generalized litmus tests to which any Biden financial appointee should be able to respond affirmatively. These include whether all financial institutions should phase out their fossil fuel engagement consistent with a 1.5ºC pathway, necessary to prevent the worst climate change impacts, and a commitment not to accept professional benefit from climate-destroying firms.
Appointees to financial regulatory agencies must also be asked about their intent to use the authorities that will immediately be available to them. Will, for instance, the next Comptroller of the Currency update oil and gas lending standards to reflect that fossil fuels are an over-leveraged, risky industry? This is, first and foremost, an accurate assessment of the industry consistent with the OCC’s duty to be an honest broker. But it would also be a way to use the regulator’s own immediate powers to fight the climate fight.
What about asking Federal Reserve nominees if they think the CARES Act’s buying binges of fossil fuel stocks reflected market risks — or even if they’ll commit to not purchasing fossil fuels bonds in future rounds of Quantitative Easing (QE)? How about asking Federal Deposit Insurance Corporation nominees whether they’ll commit to increase risk-based premiums for banks with large fossil fuel exposure? Shouldn’t the public know if any nominees to the Financial Stability Oversight Council will move to consider climate change a systemic risk to the financial system, and if so, how they plan to begin measuring it?
These aren’t just concerns for climate activists, they’re also concerns for main-street investors. Plentiful evidence now shows that funds with a social conscience — or in the language of Wall Street, funds which consider environmental, social, and governance factors (ESG) — actually outperform non-socially-minded funds. So, for instance, pressuring Department of Labor nominees to commit to pushing investment advisers to consider ESG factors when investing retirement holdings is actually good for both Ma and Pa Retiree and Mother Earth.
It is no longer tolerable to confirm nominees who lack awareness of the scale of our climate emergency and the immense work needed to address it across all aspects of American life. Questions like these should serve as a framework to guide each and every Senate confirmation process. Only nominees who respond affirmatively and with specific thought to their role as a climate leader should earn a slot in the new administration.
Of course, not every appointed position requires Senate confirmation. It is concerning that Biden has appointed several members of BlackRock’s “shadow government” to roles within the federal government which do not require a Senate hearing.
But regardless, Democrats — and the planet — have an opportunity here that should not be overlooked. It would be a grave disservice for a Democratic Senate to neglect the climate crisis in their questioning of financial regulatory nominees, and even more of a mistake to confirm appointees who fail to show their commitment to fighting it.