Today, dozens of organizations with Stop the Money Pipeline Coalition and aligned partners sent this letter to the Biden Administration, outlining our expectations for Section 2 of the Executive Order on Climate-Related Financial Risk published in May 2021. The climate-finance executive order from the administration is quite broad and could have big implications for a wide range of climate justice issues, as well as racial and economic justice. The first deliverable of this EO is due September 17, 2021, in advance of the Glasgow Climate Talks in November. Stop The Money Pipeline coalition member organizations and allies provide recommendations for the forthcoming Climate-Related Financial Risk Strategy, which we urge the Administration to make publicly available by September 17, 2021.

 

To: Brian Deese, Director of the National Economic Council

Gina McCarthy, National Climate Advisor

Janet Yellen, Secretary of the Treasury

Sholanda Young, Director of the Office of Management and Budget

 

From: Stop the Money Pipeline coalition members and allies (listed below)

 

Re: Expectations from Climate and Racial Justice Organizations for the Forthcoming Climate-Related Financial Risk Strategy

 

Dear Mr. Deese, Ms. McCarthy, Secretary Yellen, Ms. Young:

 

As organizations dedicated to preventing the worst impacts of climate change and to forging a more just and equitable society, we were pleased to see President Biden issue his Executive Order (EO) on Climate-Related Financial Risk on May 20, 2021. This important EO—the first ever to address the intersection of financial risk and climate policy—directed administration officials to develop a series of plans, strategies and actions to address the nexus of these issues. Among these plans is a government-wide strategy on addressing climate financial risk to Federal programs and financing the transition to a “net zero” economy. The strategy is described in Section 2 of the EO, to be led by the heads of the National Economic Council and the National Climate Advisor, in consultation with the Secretary of the Treasury and the Director of the Office of Management and Budget. The EO states that the plan should be developed within 120 days—which falls on September 17, 2021—and should include:

(a)  the measurement, assessment, mitigation, and disclosure of climate-related financial risk to Federal Government programs, assets, and liabilities in order to increase the long-term stability of Federal operations;

(b)  financing needs associated with achieving net-zero greenhouse gas emissions for the U.S. economy by no later than 2050, limiting global average temperature rise to 1.5 degrees Celsius, and adapting to the acute and chronic impacts of climate change; and

(c)  areas in which private and public investments can play complementary roles in meeting these financing needs — while advancing economic opportunity, worker empowerment, and environmental mitigation, especially in disadvantaged communities and communities of color.

This EO is an important component of the climate mandate that President Biden assumed upon winning the 2020 presidential election with the strongest climate platform in history. And at a time when the urgency of the crisis is made clear on a daily basis, the Stop the Money Pipeline coalition has urged President Biden to implement policies before COP26 that put all U.S. financial institutions—public and private—firmly on a path to rapidly and drastically reducing greenhouse gas emissions and centering racial, climate, and economic justice. Advocacy organizations are not the only ones urging an end to new emissions sources: in mid-May, the International Energy Agency published a roadmap for the world to keep global warming below 1.5°C. As one of the more striking findings of the report affirmed: “There is no need for investment in new fossil fuel supply in our net zero pathway.”

While many aspects of necessary climate adaptation and mitigation require legislation, financial policy and regulation is one area in which the Administration has a suite of existing authorities that allow it to take the decisive and necessary steps to mitigate further climate chaos and support the most vulnerable communities in addressing the already-locked-in impacts of climate change. In line with its commitments to take a whole-of-government approach to addressing the climate crisis, the administration must use these authorities to their full extent, including in the areas of government spending, priority-setting for federal programs, and regulation of financial actors.

To that end, Stop The Money Pipeline coalition member organizations and allies provide the following recommendations for the forthcoming Climate-Related Financial Risk Strategy, which we urge the Administration to make publicly available. 

The recommendations are organized according to the three components of the strategy as directed in Section 2 of the  executive order.

a) “the measurement, assessment, mitigation, and disclosure of climate-related financial risk to Federal Government programs, assets, and liabilities in order to increase the long-term stability of Federal operations”

 

Our expectations for what should be included in this section:

• Urging the President to declare a climate emergency.
• Clarify that emissions in excess of science-based targets for limiting global warming to 1.5 degrees Celsius will worsen the effects of climate change, thus exacerbating the risks associated with climate change to the financial sector and the economy, and as such make absolute emissions reductions a core goal for mitigating climate-related financial risk across the Federal government.
• Adopt a precautionary approach to managing climate-related financial risk, as the uncertainty inherent in the effects of the climate crisis make it unsuitable for managing via risk modeling and quantification alone.
• Make clear that no public money should go to companies engaged in expanding the extraction, production, transportation or export of fossil fuels, or whose supply chain results in deforestation, natural land conversion or peatland destruction.
• Guide agencies to end all fossil fuels subsidies and tax breaks, for both domestic and international production, to the extent feasible with existing Administrative authority, and make a clear request to Congress to take action to end subsidies in the areas in which Administrative authority does not exist.
• Outline concrete steps to wind down to zero, in a responsible way consistent with science-based climate targets, the existing fossil fuel financing and investments held by the Federal Reserve and public financing agencies, such as the US Export-Import Bank and the US International Development Finance Corporation. 
• Direct executive agencies to disclose climate, biodiversity, deforestation, and Indigenous land rights impacts created by all Federal government assets and liabilities.
• Require any Treasury or Fed-backed emergency lending or asset purchase programs open to fossil fuel companies or their financiers to be conditioned on government acquisition of a controlling equity stake with full voting rights, with the additional condition that the government would exercise those voting rights to retool company components aligned with a green economy, remediate contamination, and phase out fossil fuels as rapidly as possible while providing for a just transition and fully-funded transition support for workers in extractive industries. 
• Recommend steps to immediately wind down the Federal Reserve’s existing fossil fuel holdings to zero.
• Recommend that the Federal Retirement Thrift Investment Board and other federal retirement plan administrators incorporate robust and comprehensive climate risk analysis into their assessment of investments and set a thorough, timelined plan for phasing out investments in fossil fuel companies by 2026, increasing investments in just and equitable climate solutions, decreasing financed emissions by 50% by 2030 and reaching net zero across holdings by 2040.
• Direct executive agencies that administer federal lending programs to incorporate climate-related financial risk into their underwriting decisions in a way that reduces harm to Black, Brown, and Indigenous communities and mitigates climate-related financial risk by lending in a way that is consistent with science-based emissions targets.
• Commit to shifting federal procurement practices to harden them against climate risk and to eliminate supply chain emissions in excess of science-based targets, which helps mitigate the climate financial risk those excess emissions would create.
• Recommend developing methods for accounting for and reducing both direct and indirect emissions in the President’s budget and oversight of budget execution.

 

b) “financing needs associated with achieving net-zero greenhouse gas emissions for the U.S. economy by no later than 2050, limiting global average temperature rise to 1.5 degrees Celsius, and adapting to the acute and chronic impacts of climate change”

 

Our expectations for what should be included in this section:

• Institutionalize full respect for Tribal Nations’ treaty and sovereignty rights, including the requirement of free, prior, and informed consent of Indigenous peoples regarding federal actions affecting their lands, livelihoods, culture, and spirituality. 
• Clearly define that net zero must mean, as is consistent with science-based targets, rapid phase out of fossil fuels and deforestation, and that forest offsets, carbon capture and storage technologies, and removal and trade schemes are an unacceptable way to supposedly “compensate” for a lack of emissions reductions.
• Encourage federal lending and procurement programs to add a borrower, vendor or contractor’s alignment with science-based-target-consistent net zero plans and commitment to financing a just transition as an eligibility criterion for selection for loans and procurement contracts, where permissible by law.
• Study, design, and implement a public investment authority to offer long-term planning and investment in frontline and disinvested communities for green, publicly and community-owned infrastructure, without a profit or revenue requirement, and housing projects that create good union jobs with targeted hiring of local frontline communities. 
• Study and design a program for making reparative payments and investments to frontline communities to remedy past and on-going pollution (visible and invisible), global warming-induced environmental disasters, or displacement.  
• Provide forgivable, conditional loans to cities, states, territories, tribal governments, and other public borrowers for green, just recovery programs that prioritize lending in such a way that repairs past harm and disinvestment and prevents further harm to Black, Brown, and Indigenous communities that have disproportionately suffered from COVID-19, the climate crisis, and pollution from the fossil fuel industry. Forgivable loans should be directed to communities with at least 60 percent representation of Black and Indigenous People and other people of color, ensuring these government bodies and public agencies have access to the necessary funding to protect and expand critical public and social welfare services, to offer rent, mortgage and utility payment and debt cancellation, and expand social welfare programs.
• Lay out a program for direct lending to all cities, counties, states, territories, tribal governments, and other public borrowers at zero percent interest or fees for green, just recovery programs. 
• Halt existing and stop approving new fossil fuel infrastructure, operations, and transport projects, both onshore and offshore. 

 

c) “areas in which private and public investments can play complementary roles in meeting these financing needs — while advancing economic opportunity, worker empowerment, and environmental mitigation, especially in disadvantaged communities and communities of color”

 

Our expectations for what should be included in this section:

• Clearly define that, in order to participate in federal government programs, company net zero plans must, as is consistent with science-based targets, result in rapid phase out of fossil fuels and deforestation, and that forest offsets, carbon capture and storage technologies, and removal and trade schemes are an unacceptable way to supposedly “compensate” for a lack of emissions reductions.
• Prohibit any company receiving Federal government support or involved in any kind of public program related to climate investments from using such investments to “offset” in any way their investments in the causes of climate change, in particular fossil fuels and industries driving deforestation.
• Align infrastructure investments to promote a green, just economy without new fossil fuel infrastructure.
• Ensure investments are prioritized for Black, Brown, and Indigenous communities, and that such investments serve to remedy past harms and promote a clean, resilient, just transition for workers in the fossil fuel sector and frontline communities. 
• Require any company receiving any kind of public support or involved in any kind of public program to fully respect Tribal Nations’ treaty and sovereignty rights, including the requirement of free, prior, and informed consent of Indigenous peoples regarding company activities affecting their lands, livelihoods, culture, and spirituality. 

This memo refers specifically to the content of the Climate-Related Financial Risk Strategy outlined in Section 2 of the May 20th Executive Order. Our community is also paying close attention to the other components of the EO. We plan to follow up with our specific recommendations for those sections, though will note that in general, our expectation of the Administration is that all plans, strategies and assessments will prioritize the drastic reduction of greenhouse gas emissions from public and private actors and will center climate, racial and economic justice.

Thank you for your consideration. We look forward to discussing these proposals with you and your staff.

 

Sincerely,