Climate change could wreak havoc on nearly every aspect of life, and the U.S. financial system is no exception: Local housing market crashes and absurdly high insurance premiums are just two potential examples of the fallout. The federal government is beginning to act on these possibilities. On Thursday, President Joe Biden signed an executive order directing government agencies to expand their efforts to analyze and disclose economic risks stemming from climate change.

The executive order requires Gina McCarthy, the national climate advisor, and Brian Deese, the director of the National Economic Council, to prepare a report within 120 days on climate-related financial risks to government assets and programs. Treasury Secretary Janet Yellen also has new assignments: She will have to assess the stability of the U.S. financial system, steps being taken to improve climate-related disclosures by companies, and gaps in the oversight of insurers. The Department of Labor and the Office of Management and Budget must  take additional steps to reduce climate risks to pension portfolios and identify ways to integrate risks into federal lending and procurement programs, respectively. 

The executive order “will help the American people better understand how climate change can impact their financial security” and “strengthen the U.S. financial system,” a fact sheet from the White House notes. “We know that the climate crisis, whether through rising seas or extreme weather, already presents increasing risks to infrastructure, investments, and businesses. Yet, these risks are often hidden.”

Mindy Lubber, CEO and President of Ceres, a nonprofit environmental advocacy group, called the directive a “bold, thoughtful and important step” toward preparing the economy for the climate crisis. The executive order is “especially timely” given the International Energy Agency’s warning earlier this week that the path to limiting global warming to 1.5 degrees Celsius involves investors withdrawing from fossil fuel projects, she said. 

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The order comes as banks, investors, and regulators raise more warnings about the risks posed by climate change. Last month, 160 banks, insurance companies, and other financial institutions pledged to cut the carbon emissions of their investments and achieve net-zero emissions by 2050. The list includes Bank of America and Citigroup, which are among the largest financiers of fossil fuel projects. And earlier this year, the CEO of the investment giant BlackRock, Larry Fink, recommitted to pushing companies to achieve net zero by 2050. “We know that climate risk is investment risk,” he wrote in a letter to shareholders.

Whether these commitments constitute mere lip service or a serious reckoning on Wall Street remains to be seen. Meanwhile, the risks continue to mount. First, as the planet warms, extreme events such as hurricanes and wildfires are becoming more frequent and destructive, putting more homes, factories, and businesses backed by bank loans at risk. And as more of the economy runs on clean energy, the value of coal plants, natural gas pipelines, and other fossil fuel infrastructure could plunge, leading to ripple effects through companies that own them and banks that may have financed them. Given that tens of millions of people own mortgages, pay for insurance, and invest in the stock market, such systemic risks could wind up hitting every American’s pocketbook. 

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The federal government can play a key role in ameliorating these risks. For one, the U.S. currently does not have uniform, mandatory climate risk reporting requirements for companies; without these, investors could be in the dark about the true risks in their portfolios. President Biden’s latest executive order tasks the Treasury Secretary with issuing a report that assesses whether the federal government needs to “enhance” climate-related disclosures by regulated businesses.

The Biden administration has also taken other steps in its first 100 days to address climate risks. The Securities and Exchange Commission, a regulatory agency that is tasked with protecting investors, has created a special climate and environmental, social, and corporate governance (ESG) task force to root out firms misleadingly touting environmental benefits of financial products that have none. It has also issued a “risk alert” warning investors of the potential for greenwashing and securities fraud in the ESG market.

Still, some environmental groups say Biden must move faster to address climate risks by phasing out private and public financial support for fossil fuel projects.

“The fossil fuel industry and Wall Street have been extracting from Black, Brown, and Indigenous communities for decades and driving our climate crisis off a cliff,” said Erika Thi Patterson, the climate and environmental justice campaign director with the Action Center on Race and the Economy, in a statement. “Over 100 days into [the Biden] presidency we’re still hearing about plans to release plans. This pace fails to match the urgency of our crisis — we need immediate, bold executive action to stop Wall Street from financing climate catastrophe.”