At the start of 2022, Gro put together a Watchlist with our predictions for a handful of major themes in climate policy for the year just ended.
Today, Gro is looking back at those forecasts to see what we got right and where we missed the mark during a year in which climate policy was impacted by extreme weather disruptions, armed conflict in Europe’s breadbasket, and high-stakes midterm elections in the US.
Next week we will publish our Watchlist for 2023, with new forecasts for climate policy likely to drive ESG investing markets, corporate sustainability accounting and disclosure, and more in the year ahead.
Driven both by policy and by climate-related impacts increasing in frequency and intensity, climate risk is now recognized as a business and financial risk. At Gro, we have the data and analytics to help financial institutions, governments, and corporate risk managers identify, address, and adapt to a warming climate and its many effects.
Here’s how Gro’s forecasts for climate policy panned out for 2022:
US Climate Policy to Face Headwinds ✓
What we forecast: A continuation of the overall status quo for climate policy in the US, the world’s second-largest emitter by volume of greenhouse gas driven by:
What we got right: While the Biden administration has made significant progress in its two-year effort to execute a climate U-turn from where the Trump administration left off, US climate policy overall remains about where it was a year ago. The Supreme Court ruled against the EPA in West Virginia v. EPA, No. 20-1530, giving new life to an arcane, agency-limiting legal argument that has already been asserted against draft climate-risk disclosure rules proposed by the SEC. And with a new Republican majority in the House of Representatives, agency-led climate action will become even more difficult to execute.
What surprised us: A year ago, the likelihood of any major congressional action in 2022 — a high-stakes midterm election year — seemed very small, after Sen. Joe Manchin (D-W.Va.), citing the bill’s climate-related energy provisions, sided with Senate Republicans to kill the Biden administration’s Build Back Better Act. But over the summer, he and Senate Majority Leader Chuck Schumer engaged in surprise, secret negotiations that resulted in the proposal, and passage, of the US$700+ billion Inflation Reduction Act (IRA) of 2022. With no emissions-limiting mandates or regulations, the IRA is not a strong new climate law, but it has the potential to help incentivize clean energy and climate-related investments at the scale that will be needed to approach the Biden administration’s ambitious 2030 climate goals.
Mandatory Disclosure Will Drive Progress on Pricing Climate Risk ✓
What we forecast: Looking ahead in Europe, and seeing likely legislative headwinds in the US, Gro anticipated that financial service regulators would continue to be the primary drivers of change in the climate risk assessment space.
What we got right: 2022 was a big year, particularly in the EU, for corporate climate risk disclosure, pushing climate risk assessment to the forefront of active corporate governance. The EU issued the world’s most comprehensive and detailed corporate disclosure rules regarding ESG and climate-related risk in May 2022, the European Sustainability Reporting Standards (ESRS).
This came on the heels of a landmark proposal in March by the US Securities and Exchange Commission (SEC) to require registered companies to disclose their climate risk to current and potential shareholders. While Europe’s ESRS is on track to go into effect this coming summer, those climate policy headwinds in the US have delayed — and are imperiling — finalization and implementation of the SEC’s proposed reporting framework.
EU Greenflation Worries ✘
What we forecast: Almost two months before Russia invaded Ukraine, Gro anticipated that the pace of Europe’s clean energy transition might face political pressure prompted by then-growing worries about rising inflation and high energy prices.
What surprised us: Despite record high inflation and food and energy prices, Russia’s aggression on the battlefield and in the energy markets looks like it will, if anything, result in a slight acceleration of Europe’s clean energy transition as the EU’s 210 billion euro ($213 billion) REPowerEU plan issued in May makes it clear that energy efficiency, renewable electricity, and heat pumps are being viewed as the key to ending the EU’s dependence on Russian gas.