Presented by JPMorgan Chase & Co.
With help from Zachary Warmbrodt and Victoria Guida
THE BIG IDEA
IT'S THE MONEY THAT MATTERS — President-elect Joe Biden made a public splash with his top climate nominees, notably John Kerry and Gina McCarthy. Less showy but equally influential are the dozens of accounting and economic wonks who will be installed throughout Washington’s financial services ecosystem. Steeped in sustainability and social justice, they’re likely to have a deep impact on corporate transparency and the flow of capital.
The appointees and new hires will populate the top echelons — Treasury and the SEC for starters — but they also will have perches at under-the-radar bodies that govern accounting, mortgage-backed securities, export credit and the $4 trillion municipal bond market.
The top general in this ESG army is Janet Yellen, who if confirmed to run Treasury also will lead the Financial Stability Oversight Council. Yellen, who testifies today before the Senate Finance Committee, rarely misses a chance to talk about the financial and economic risks of climate change, and she has endorsed a carbon tax.
But take a look, too, at Yellen’s incoming chief of staff. Didem Nisanci is global head of public policy at Bloomberg. Her current boss, Michael Bloomberg, leads the Task Force on Climate-Related Disclosures, a private group borne out of a meeting of G-20 finance ministers. Nisanci is a member, and the group is fast becoming the de facto global standard for climate-related financial disclosure.
That brings us to Gary Gensler, a Goldman Sachs alumnus and Biden’s pick to lead the SEC. The agency is ground zero for shareholder and consumer groups that want more corporate reporting — a lot more of it — on greenhouse gas emissions, racial equity, executive pay and other ESG factors.
Progressives back Gensler in part because he didn’t return to Wall Street after leaving the Commodity Futures Trading Commission, which he led under President Barack Obama. Instead, he took up a professorship at MIT.
“He doesn’t seem to be someone who’s seeking future employment,” said Dieter Waizenegger, executive director of CtW Investment Group, which advises shareholders. “He doesn’t have, maybe, the baggage that others would bring.”
Then there’s the Labor Department, where nominee Marty Walsh is expected to roll back a 2020 rule that hemmed in pension fund decision-making on climate change, racial justice and other ESG risk factors. Walsh, the mayor of Boston, leads Climate Mayors, a bipartisan network of more than 470 city leaders that believe economic growth and environmental stewardship go hand in hand.
Love him or hate him, BlackRock’s Brian Deese will bring his ESG chops to the National Economic Council, which he’ll lead under Biden. Deese has taken heat for what the left considers BlackRock’s failure on divestitures, but he’s in sync with what likely will be Biden’s middle-of-the-road economic policies.
Don’t overlook Bharat Ramamurti, another member of the Biden NEC. Ramamurti leads the Roosevelt Institute’s Corporate Power program, a project that seeks to hold companies accountable for workers and the overall economy, not just their bottom lines. He’s expected to have a sustainability portfolio at the NEC.
“This idea that in good times everyone but workers are going to benefit first and then in bad times, immediately workers are going to be the first to get hit, that’s just not sustainable,” Ramamurti said in October. “What we need to do is figure out what series of changes are necessary to link up again corporate profits and workers’ wages and benefits.”
In short, the regulatory environment for financial services companies and their clients could look a lot different, and soon. Change won’t necessarily wait for Congress, or even confirmation votes.
As head of FSOC, for example, Yellen won’t need legislation to invoke climate risk as a reason to impose more oversight on giant asset managers, hedge funds and insurance companies. At the SEC, even before Gensler is confirmed, former Chair Jay Clayton’s departure could have a thawing effect on staff decisions going into proxy season.
Biden’s army of ESG wonks is one reason Washington’s most influential financial industry groups, including the Institute of International Finance, the American Bankers Association, the Bank Policy Institute, and the Securities Industry and Financial Markets Association, are joining the climate chorus. POLITICO’s Zach Warmbrodt has the scoop.
“The administration is making sure climate considerations are embedded across the board and not siloed,” Waizenegger said. “It can’t be segmented off to just the EPA.”
And this midnight rule is DOA: As banks retreat from fossil fuels, a top Trump banking regulator used his last day in office to hit the brakes. But the rule from the Office of the Comptroller of the Currency hadn’t been published as of Tuesday. The Federal Register doesn't publish on Inauguration Day, and the rule is unlikely to take effect under Biden. Lorraine and Victoria Guida have the story.
YOU TELL US
Biden will be sworn in Wednesday as the 46th president of the United States. Singer-soulster Michael Franti, who treads gently on the Earth by not wearing shoes, will be among the performers at the Clean Energy for Biden ball. Franti’s feet braved Washington’s subfreezing cold when he performed at Al Gore’s Green Ball in 2009.
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Around the Nation
TEMPORARY RELIEF WON’T FIX INCOME INEQUALITY — For a sobering example of the wealth gap, take a look at California. Despite the recession and economic shutdowns, the state ended 2020 with a record $15 billion surplus, thanks to wealthy Bay Area tech workers, who have grown even richer during the pandemic.
“The folks at the top are doing pretty damn well,” said Democratic Gov. Gavin Newsom, a multimillionaire himself. California’s tax system is designed to take a bigger bite out of the wealthy, and Newsom’s $227 billion budget would direct that windfall to low-income residents with more spending on schools and stimulus checks, POLITICO’s Mackenzie Mays reports.
Still, the pandemic has only widened the divide between California’s haves and everybody else. And while the Golden State has it particularly bad, the problem is nationwide.
Some say it’s a repudiation of the American mythology of self-reliance. “We live in a society where we don’t believe in government intervention, and there’s this narrative that you can pull yourself up by your bootstraps,” said Jhumpa Bhattacharya, a vice president at the Insight Center for Community Economic Development. “When the pandemic hit, we saw that’s not true, and my hope is that we will be able to develop a new understanding of how our society works.”
Easy fixes don’t exist. Tax hikes are politically unpopular in California, and businesses, including Oracle and Hewlett Packard Enterprise, have decided to leave for low-tax Texas.
Biden’s stimulus isn’t all that different from Newsom’s, albeit with a much larger price tag. It’s mostly temporary relief to keep families afloat until the virus is under control, which could slow the pace of yawning income inequality but wouldn’t tackle it head-on.
Biden’s package — which would expand some of the government’s most effective anti-poverty programs, including refundable tax credits for the working poor and nutrition assistance — requires signoff from Congress. Passage will be complicated at best, especially now that the Senate has another impeachment trial to run.
Transition 2021
KILLING KEYSTONE — The epic tale of the Keystone XL pipeline is taking another turn. Biden plans to yank the project’s cross-border permit on his first day in office, POLITICO’s Lauren Gardner and Ben Lefebvre report, overturning one of Trump's first executive actions and killing a project that has become a political totem in the fight between climate activists and the oil industry.
Despite analysts who say the boom in U.S. shale oil has made new sources of Canadian crude less important, TC Energy — Keystone XL’s sponsor — has continued to fight years of legal and political challenges.
If you’ve forgotten all the details — Who can blame you? — Ballotpedia has a handy pipeline timeline.
ON THEIR WAY OUT THE DOOR — The Trump administration today will stand alongside a group of oil companies at the Supreme Court to argue for the end of state climate change lawsuits. The case will decide whether a lawsuit brought by the city of Baltimore against oil and gas companies belongs in state courts, where the plaintiffs want it, or federal courts, where the oil companies stand a better chance of winning. The court's decision could determine the path for more than a dozen other legal challenges the oil industry is facing, POLITICO’s Alex Guillen reports.
AROUND THE WORLD
Hopefully they’ll use less concrete. European Commission President Ursula von der Leyen wants the continent to tap its inner avant-garde to launch a new Bauhaus movement. The experimental art school, founded in interwar Germany, was famed for marrying form with function — and for its heavy use of cement, a major greenhouse gas emitter. Von der Leyen wants the new Bauhaus to match “style with sustainability” and has challenged designers, architects and scientists to collaborate. The design phase launched Monday.
What We're Reading
— Renew Oceans, a program funded by Big Oil and chemical companies to end runaway ocean plastic waste, has shuttered with little to show for its work. The group aimed to collect nearly 500 metric tons of plastic trash from the Ganges, but collected less than one before it shut down operations, people involved in the project told Reuters. The project’s closure is a sign that an industry whose financial future is tied to the growth of plastic production is falling short of its targets to curb the resulting increase in waste, environmentalists said.
— The New York Times connects the dots between the Capitol riot and climate disinformation.
— The European Union in March will unveil landmark rules requiring greater transparency on ESG investing, but data gaps could still hinder progress, the Financial Times reports.
— Eat oysters, save New Orleans. As restaurants reopen, they are trying to jump-start oyster shell recycling to fight erosion in the bay, NOLA.com reports.
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