Is financial regulation the way to deal with climate change? Exxon loses a lot of oil, and more

President Joe Biden plans to use every tool at his disposal in the fight against climate change, including financial regulation. While not an intuitive choice, supporters say mandating that public companies and investment firms quantify and disclose climate risks — and the costs associated with them — is a bold step that could make ESG (environmental, social and governance) data as commonplace in corporate financial reports as sales and profit figures.

The U.S. Treasury may be able to facilitate climate stress tests on U.S. banks and insurers, Treasury Secretary Janet Yellen said Monday, though the tests likely wouldn’t impose capital requirements or limit dividend payouts as existing stress tests do.

Exxon Mobil Corp.’s annual filing with the SEC, which dropped late Thursday, reveals the company debooked 6.3 billion barrels of oil equivalent in 2020, or almost 30% of its proved reserves. That’s a lot of oil and gas gone.

Climate change is one of the greatest threats facing humanity. As such, the House Subcommittee on Investor Protection Entrepreneurship and Capital Markets is leading the discussion with a hearing today. They rightfully recognize that with a changing climate comes a completely new dimension of risk to the financial industry.