Warren includes TCFD in updated climate disclosure bill in a busy week for sustainable finance in Washington

A series of environmental, social and governance developments within the beltway

A reference to the Task Force on Climate-related Financial Disclosures (TCFD) has been added to an updated climate disclosure bill tabled by Elizabeth Warren, the US Presidential candidate, in a busy period for ESG issues in the US capital.

It’s one of a string of environmental, social and governance developments within the beltway this week.

Warren, the Democratic Senator from Massachusetts, has re-introduced the Climate Risk Disclosure bill with Sean Casten, the Illinois Congressman with a background in clean energy.

The bill was first introduced in 2018 and the updated text now includes wording referring to the TCFD, the disclosure initiative spearheaded by Bank of England with support from 792 organisations.

The proposed act would require the Securities and Exchange Commission, the US financial regulator, to issue rules within one year to require every public company to disclose its direct and indirect greenhouse gas emissions and the total amount of fossil-fuel related assets that it owns or manages.

Firms would also have to show how their valuation would be affected if climate change continues at its current pace or under different trajectories. They would also have to disclose their “risk management strategies related to the physical risks and transition risks posed by the climate crisis”.

The new wording states that if the SEC has not issued the rules within two years of the act, companies that report against the TCFD would be “deemed in compliance” with the Securities Exchange Act of 1934.

The sponsors hope the legislation will “help investors appropriately assess climate-related risks, accelerate the transition from fossil fuels to cleaner and more efficient energy sources, and reduce the risks of both environmental and financial catastrophe”.

It comes after a group of Democratic senators this week tabled a bill to establish the country’s first national green bank.Also this week, a subcommittee of Congress’s Committee on Financial Services held a hearing on how to improve ESG disclosures, with evidence from Tim Mohin (GRI), James Andrus (Investment Manager-Financial Markets, Sustainable Investment, CalPERS) and Mindy Lubber (CEO of Ceres).

Not to be outdone, derivatives market regulator the Commodity Futures Trading Commission voted to establish a Climate-Related Market Risk Subcommittee under its Market Risk Advisory Committee. It is seeking nominations for membership on the Subcommittee by September 9.

“I look forward to convening experts from industry, academia, and the public interest for what I intend to be a robust and critical effort to identify and examine the risks that climate change poses to the stability of our financial system, and determine what future actions policymakers and market participants must consider to mitigate these risks”, said CFTC Commissioner Rostin Behnam.

Among the tasks of the group would be to identify “how market participants can improve integration of climate-related scenario analysis, stress testing, governance initiatives, and disclosures into financial and market risk assessments and reporting”.

Also under scrutiny would be the ways market participants’ data and analyses can “enhance and contribute to the assessment of climate-related financial and market risks and their potential impacts on agricultural production, energy, food, insurance, real estate, and other financial stability indicators”.

Meanwhile, on the other side of the country, the California State Teachers Retirement System (CalSTRS) is facing a protest today at its Investment Committee by Fossil Free California which is demanding that the fund divest from fossil fuels.