US regulators act on climate change

Under the new administration, US regulatory bodies are taking important steps towards the introduction of new policies to flight climate change.

This week, the National Association of Insurance Commissioners (NAIC) approved a mandatory requirement for insurance companies to disclose the financial risks they face from climate change. The new requirements would mean all insurance companies with annual premiums over $500m will be asked to fill out an Insurance Climate Risk Disclosure Survey every year, with the first reporting deadline being May next year.

F&C, which has been actively encouraging companies and regulators to take action in the fight against climate change, welcomes this step. Alexis Krajeski, Associate Director at F&C's Governance & Sustainable Investment (GSI) team, explained: "We have been engaging with the NAIC in the US and broader industry bodies such as ClimateWise and the Association of British Insurers in the UK, with the aim to improve not only corporate behaviour but the overall business landscape. We have asked insurance regulators to improve information disclosure on climate-risk to the market, while allowing insurance pricing flexibility that reflects growing climate risk, and collaboration with local planning commissions to invest in adaptation plans to reduce the physical impacts of climate change and associated losses to insurers."

The move from the NAIC follows last week's proposal by the US Environmental Protection Agency (EPA) to introduce the first comprehensive national system for reporting emissions of carbon dioxide and other greenhouse gases produced by major sources across the country.

The new reporting requirements would apply to companies supplying fossil fuel and industrial chemicals as well as manufacturers of motor vehicles and engines. It would also apply to emitters of greenhouse gases with emissions equal or greater than a threshold of 25,000 metric tons per year. Most small businesses whose emissions fall bellow that threshold would not be required to report their emissions.

"The scheme will allow the collection of data in preparation for a possible emissions trading scheme," said Vicki Bakhshi, Associate Director at F&C's Governance & Sustainable Investment (GSI) team. "For some time F&C has been pressing companies to measure, monitor and disclose emissions, and to prepare themselves for regulations ahead. As expected with the election of the new President, policies are evolving rapidly and companies cannot afford to ignore the issue any longer."