ESG in the First 100 Days?

ESG are a set of criteria that investors use to evaluate the environmental and societal impacts of a business. Some European countries require that companies report their ESG metrics, but ESG reporting in the United States has generally been voluntary. There are some indications that a Biden administration — especially coupled with a democratic congress — may seek to amplify ESG reporting in the U.S. As an early indication of such action, the new administration is expected to view ESG differently than the Trump administration.

Here are some initiatives to watch out for early in the Biden administration:

• Rejoining the Paris Climate Accord – President-Elect Biden has pledged to rejoin the Paris Climate Accord immediately upon taking office. Though the President can rejoin the accord through executive action, the Biden administration may seek to work with Congress to formalize the United States’ participation legislatively, making it more difficult for subsequent administrations to withdraw.
• Steps to Temper the Effect of DOL Rule – Late last year, the Department of Labor (DOL) promulgated a Final Rule requiring fiduciaries subject to ERISA to evaluate investment opportunities based upon financial performance factors, rather than ESG. Some expect the Biden administration to soften the effect of the rule, either by repealing the rule through a formal rulemaking or by issuing sub-guidance allowing for consideration of ESG factors.
• New SEC Requirements – President-Elect Biden will have the opportunity to appoint a new Securities and Exchange Commission (SEC) chair, giving three of the five SEC Commission seats to Democrats. Many expect the new SEC leadership to prioritize ESG disclosures, especially disclosures of climate-related risks, including greenhouse gas emissions, and diversity issues.
• Executive Actions Aimed at Reducing Fossil Fuel Reliance by the Federal Government – President-Elect Biden reportedly has planned a series of executive orders to address climate-related issues. These include using the federal government procurement system to encourage production of clean energy and zero emission vehicles, and ensuring the government buildings and facilities are more energy efficient.