July 20, 2020

As we commemorate, this year, fifty years since the advent of Earth Day, it is easy to forget that the first event was celebrated for its bipartisan nature, organized by a Democrat Senator from Wisconsin and a Republican Congressman from California. In the months that followed, President Nixon proposed the creation of the Environmental Protection Agency, and strong bipartisan majorities in the House and Senate passed historic clean air legislation.

Today, little memory remains of the halcyon days of the 1970s, when environmental policy was reflexively nonpartisan. While public opinion appears to be growing for the government to do more to address climate change – recent Pew Research Center polling suggests nearly two-thirds of Americans support policy action on this front – Congress seems paralyzed by alarmism on both sides of the aisle. Many Republicans remain convinced that policy prescriptions combating climate change will lead to draconian energy sector job losses and massive tax increases, while Democrats on the left fight to “out-green” each other with unrealistic mandates and untethered spending. This is not to suggest that compromise is out of reach.

A shift within the Republican ranks on climate issues is underway. Members of Congress with disaster-prone Districts see firsthand the need to tackle these issues. Rep. Garret Graves (R-LA), the ranking Republican on the House Select Committee on the Climate Crisis, has repeatedly said that he has found common ground with Democrats on the need for community resiliency, adaptation and mitigation in the face of the changing climate. Graves is not alone; there are currently 7 Republican Senators and 23 Representatives on the Climate Solutions Caucus, a group formed to promote bipartisan discussion on climate solutions and work on climate legislation.

Non-traditional voices on these issues have also become more vocal, including Rep. Patrick McHenry (R-NC), the lead Republican on the House Financial Services Committee. McHenry read with interest a recent article in Politico about the impending threat of climate change on the U.S. mortgage market and the risks-posed to the balance sheet of taxpayer-backed loans at Fannie Mae and Freddie Mac. He noted his specific concern on a recent webinar hosted by former Congressman Mike Ferguson (R-NJ) at BakerHostetler, stating: “We’d responsibly benefit from a discussion about changing weather patterns and flooding cycles and how we actually model those things out from a governmental risk perspective.” The article, in his view, highlighted that GSEs and the National Flood Insurance Program (NFIP) are “not at all accounting for climate science…” nor “changes in flooding patterns.” Possibly chiding fellow Republicans or recalcitrant government bureaucrats, he concluded that “even if you don’t want to have the climate debate, you need to acknowledge that weather is a systemic issue… let’s actually have a thoughtful conversation about the governmental risk portfolio here and protecting the taxpayers.” Coincidentally, McHenry’s words are analogous to the refrain of Senator Brian Schatz (D-HI), chairman of the Senate Democrats’ Special Committee on the Climate Crisis: “The failure of our regulators to accurately and thoroughly account for that risk is growing more serious by the day. They don’t have to have an opinion about climate change as a public policy matter. But risk is risk.”

McHenry’s openness to discuss climate issues is not new. Last July, at an event hosted by the Nature Conservancy in his home state of North Carolina, he was clear and concise on his view: “You look at real science and climate change is real; man has contributed to it.” The sponsoring organization took notice, making the quote into a 30-second Facebook clip promoting continued discussions.

The comments from McHenry provide one avenue for successful engagement with Republicans on climate issues. Like many conservatives, including Graves, he is concerned about the economic costs of inaction. The government, according to this view, needs to be considering risks, changes in climate, and vulnerabilities to existing programs and funding priorities. This could include not only reforms to the NFIP and GSEs, but also prioritizing climate risk and building codes in federally funded infrastructure projects – such as highways, bridges, schools, hospitals, seaports, wastewater treatment plants, etc. The Federal Flood Risk Management Standard (FFRMS), issued in 2015, would have accomplished this goal by urging federal agencies to consider climate risk when using taxpayer funds to build in flood-prone areas. And while the current Administration shelved the Executive Order implementing the FFRMS, pursuing similar ends through legislation on a bipartisan basis in Congress is a worthy goal.

Many have noted that climate resiliency only gets us so far. “Step two,” to use Rep. Graves own words from a New Yorker article published last year, “is emissions reductions,” and getting to the root cause of climate change. While more elusive, areas for bipartisan compromise include public investment in low-carbon technology, job-creating renewable-energy companies, energy storage development, such as carbon sequestration, and a facility where corporations can trade carbon reduction credits. Right-leaning commentators, including the R Street Institute and the Heritage Foundation, have outlined additional areas where agreement could be found even in the House Democrats recently released climate plan. Specifically, they describe “fodder for conservatives… and progressives eyeing areas for bipartisan opportunities in the next Congress” and come to the conclusion that “quality environmental policy must be durable and pro-market.”

In looking at future regulatory and legislative decisions on these fronts, policymakers would benefit from robust engagement from the financial services sector. Due to the nature of underwriting, insurers and reinsurers are uniquely positioned to provide data on future risk, particularly the economic consequences of the increasing frequency and intensity of extreme weather events. A handful of companies have already begun to raise these issues on Capitol Hill, including Zurich Insurance Group, which provided a witness last year for a hearing before the Select Committee entitled: “Creating a Climate Resilient America: Business Views on the Costs of the Climate Crisis.” Francis Bouchard, Group Head of Public Affairs and Sustainability for Zurich, concluded that “the insurance sector has a fundamental role to play in helping society prepare for and address the costs associated with climate change.” Insurers are not alone. Earlier this year, the Chairman and CEO of Blackrock, the world’s largest asset manager, said in an open letter to CEOs that climate change has put us “on the edge of a fundamental reshaping of finance.” By BlackRock’s own estimation “extreme weather events pose growing risks for the credit worthiness of state and local issuers in the $3.8 trillion U.S. municipal bond market.” Banks have responded in kind. Just this week, Morgan Stanley’s Chief Sustainability Officer, Audrey Choi, told Politico about the bank’s plans to publicly make available financial disclosures on the climate impact of its lending and investments. It is important to note, also, that conversations in Europe on climate have progressed much more rapidly than on this side of the Atlantic. Increased commitment from the business community in the U.S. will serve to bolster the potential for balanced, bipartisan action.