The ‘E’ – From climate sceptic to climate action
President Biden’s announcement of a 50-52% reduction target for greenhouse gas emissions by 2030 catapults the country from one of the least ambitious developed countries on climate change to one of the most. The baseline year of 2005 means that the target is somewhat less ambitious than it at first appears, but on a like-for-like basis it compares favourably with the targets of other key economic blocs, such as the EU.
Even more importantly, President Biden is making good on his election promise to make the US a key player again in international climate negotiations. Having re-entered the Paris Agreement at the start of his administration, Biden hosted a Climate Summit last week, convening 40 global leaders, which catalysed increased ambition from some other countries, including Japan and Canada. The US has also pledged to put pressure on laggards, such as Russia.
Close scrutiny will be now be paid to delivering on this ambition. The revocation of the Presidential approval for the controversial Keystone XL pipeline was an early sign of change, and the infrastructure plan recently announced was an important step, allocating $174bn to boost the electric vehicle market. President Biden’s administration has also been busy re-engineering the federal machinery to integrate climate change into decision-making on a systematic basis: all executive departments and agencies were ordered to review and take action to remediate any federal regulations introduced by the previous administration that were either harmful to the environmental or unsupported by best available science.
Tough choices lie ahead, and with only a thin margin in Congress, some of the more controversial measures such as a carbon tax are likely to be a battle to get through. However, the achievements in the first 100 days of Biden’s presidency so far have undoubtedly been bold, representing a 180-degree turnaround from the climate policies of the previous administration.
The ‘S’ – Advancing racial equity
In the wake of protests around George Floyd’s murder and the rise of the Black Lives Matter movement, tackling racial injustice was high on Biden’s agenda. Moving beyond rhetoric, we have seen this manifest in his ‘Build Back Better’ infrastructure spending plan, looking to address racial inequities in various institutions such as housing, transportation, employment and healthcare.
For example, the plan would expand affordable housing options to make it easier for people of colour to buy homes, eliminate exclusionary zoning laws, and rebuild a public housing system. The proposal includes a $400bn investment in care work for elderly and disabled people to create jobs, increase wages and benefits for care workers, who are predominantly women of colour. In addition, the Department of Justice was stopped from renewing existing private prison contracts, in order to address mass incarceration that disproportionally impacts ethnic minorities.
On indigenous rights, Biden has announced his administration’s commitment to honour the sovereignty of indigenous governments, or tribal governments, and to ensure consultation on policies that affect them. Aside from the aforementioned cancelling of the Keystone XL pipeline, which has long been opposed by indigenous-led groups because of the impact it could have on indigenous land, the American Rescue Plan stimulus bill has directed $31bn directly to Tribal Nations, who have been hard hit by the pandemic and have historically been underfunded.
The ‘G’ – Changing attitudes at the securities regulator
Alongside the new administration, the U.S. Securities and Exchange Commission (SEC) Chair Jay Clayton (a Trump appointee) stepped down, with the majority amongst the five commissioners shifting from red to blue. Biden’s appointee, Gary Gensler, is a well known (and feared) regulator who previously chaired the Commodity Futures Trading Commission and is expected to end four years of rule-easing seen under Clayton.
This has led to significant changes to the SEC’s agenda, which has already spoken much more positively regarding the responsible investment industry and using proxy voting to promote better ESG performance. By means of example, they appointed a new role of climate czar and have encouraged companies to better disclose climate-related risks to investors. In addition, it has been anecdotally reporting that SEC staff, who are able to block ESG shareholder proposals from appear on company meeting agendas, have allowed more proposals to advance since the recent change in tone at the top.
Sometimes a change in administration comes in with a whimper, sometimes with a bang. Without a doubt, the election of President Biden falls into the second category, bringing with it a political philosophy fundamentally at odds with his predecessor. The first 100 days have seen not only some significant policy decisions, but also a change in culture. Companies now need to show themselves agile to this new ESG agenda, much of which aligns with what investors have been calling for (and which many individual States had implemented long ago). Inevitably, deep-entrenched issues such as racial equality take far more than a single political cycle to shift, but the first 100 days clearly signal an intention to make progress.