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A legislative war on climate financial risk

Illustration of a pattern of the SEC logo with abstract clouds of smoke.

Illustration: Shoshana Gordon/Axios

The Hill's war of words on climate financial risk could turn into policy pendulum swings, depending on how the election goes.

Why it matters: Much of the focus of late has been on GOP opposition to the SEC climate rule and ESG generally — and that's important.

  • But Democrats also laid a lot of legislative groundwork on this issue in the last Congress that could become relevant again.

Zoom in: If Democrats keep power in at least one chamber and the White House next year, they'll likely try to tackle climate financial risk in ways that go beyond the SEC and publicly traded companies.

  • Rep. Sean Casten, who leads the Congressional Sustainable Investment Caucus, said he sees disclosure at the SEC as a "first step" toward a broader federal response.
  • "What we should be doing is doing a scenario analysis of the economy that says, Where is the risk moving? Where is the risk pooling?" Casten told Axios.
  • "We have to have the corporate disclosure information in order to get to that larger question."

Casten led a bill with Sen. Brian Schatz last Congress that would require the Fed to do those kinds of climate risk assessments of big financial companies.

  • He said reintroduction this year is TBD, but it's a model for the kind of policies Dems hope to build off of the SEC disclosure rules.
  • House Democrats also passed a suite of ESG and political disclosure legislation in 2021, parts of which could get revived if there's a Dem House next year.

The other side: Republicans will take the first step Wednesday toward a Congressional Review Act repeal vote of the SEC disclosure rules.

  • GOP lawmakers also introduced a series of CRA resolutions last week to roll back a new framework for climate financial risk management at the Federal Deposit Insurance Corp., the Fed and the Comptroller of the Currency.
  • The SEC is an independent agency, of course, but Republicans are likely to try to limit its power and go after these climate risk rulemakings any way they can if they're in control next year.
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