Democratic Senator Joe Manchin from West Virginia, alongside more than a dozen Republicans, has raised concerns about alleged pressure from the Treasury Department on state insurance regulators to consider ESG (Environmental, Social, and Governance) factors.
Lawmakers recently accused the Federal Insurance Office (FIO), established to oversee the insurance sector comprehensively, of unlawfully attempting to influence state-level authorities and insurance companies to account for climate risks. In August 2021, the FIO sought input on how climate change could impact the insurance market, aiming to assess climate-related risks in October 2022 through a data collection effort labeled as impractical.
The FIO addressed a letter to Treasury Secretary Janet Yellen, acknowledging that its actions, despite the absence of formal rules or regulations, had indeed exerted pressure on state insurance regulators and insurers. This raised concerns that they might feel compelled to adopt one-size-fits-all climate-risk mitigation policies, rather than building upon existing efforts to manage risks and protect policyholders from changing weather patterns, which has been beneficial for both the industry and the public.
The Federal Insurance Office plans to create a national mapping of property and casualty insurance risks related to climate change. Yellen previously highlighted the impact of Hurricane Ian in Florida as an illustration of how Americans are grappling with the rising costs of climate change.
The letter further expressed apprehension about this development potentially disrupting a longstanding trend of increased state regulation of insurance in favor of federal oversight.
A group of Republican senators, including John Thune (SD), Tim Scott (SC), and John Barrasso (WY), wrote a letter to Vice President Joe Biden, expressing dissatisfaction with the Biden administration’s utilization of the Federal Insurance Office (FIO) to promote what they deemed an “unrealistic environmental agenda.”
The signatories of the letter also referenced President Biden’s recent veto that prevented the repeal of a Labor Department rule allowing retirement fiduciaries to consider climate change and other ESG factors when making investment decisions and exercising shareholder rights. They argued that fiduciaries should base their investment decisions solely on financial factors, as currently required. Senator Manchin, one of the few Democrats in Congress, faces reelection in a predominantly Republican state next year.
Critics argue that the integration of ESG principles, which combine financial considerations with political objectives such as reducing carbon emissions, can be detrimental to businesses. Following the veto, Manchin stated in a statement, “The administration’s unrelenting campaign to advance a radical social and environmental agenda is only exacerbating these challenges.”
The administration’s support for ESG principles coincides with efforts to reduce emissions from coal and natural gas power plants, as well as regulations on gas stoves and dishwashers. Manchin has announced his intention to vote against any nominee for the Environmental Protection Agency until there are revisions to the power plant requirements.