Repeal of the ‘Endangerment Finding’ by the US Environmental Protection Agency (EPA) will increase regulatory fragmentation, adding to business costs and uncertainty, forcing investors to engage directly on climate pollution rather than relying on compliance, experts have warned.
The repeal of the 2009 ruling absolves the EPA of responsibility for regulating emissions of greenhouse gases (GHGs) by US companies, having previously formed the legal basis for federal regulation across multiple industries.
The decision introduces cost and uncertainty for vehicle manufacturers and other emissions-intensive industries which have been shifting their business models to lower carbon approaches, in line with federal, state and international regulations. It may also open them to public nuisance lawsuits.
“Ignoring the economic and public health risks of climate pollution puts US leadership at risk, limits future innovation, and threatens both human health and key economic pillars,” said Anne Kelly, vice president, government affairs, at Ceres, a non-profit advocacy group and investor network.
“This repeal further increases competitive risks for US companies and undermines the economic interests of all Americans. Investors and companies have made clear that they support this crucial policy foundation.”
Rick Alexander, CEO of the Shareholder Commons, which works with investors on sustainability issues, said the withdrawal of the endangerment finding would force investors to prioritise their US climate engagement activities on portfolio companies rather than policymakers.
“US companies seeking to maximise their own profits are utterly unrestrained as to the damage created by their GHG emissions. Long-term diversified investors have both the incentive and the tools to push corporations towards climate sanity through system level investing and system stewardship,” he wrote in a LinkedIn post.
US-based asset manager Trillium Asset Management said the gap between leaders and laggards would widen in the absence of “coherent climate regulation”, adding that firms that cut emissions voluntarily would reduce their future environmental liabilities, litigation risks, and compliance costs.
“We will use our position as investors to advocate for ambitious corporate action, informed by science,” the firm said in a statement on its website.
“Corporations can meaningfully impact our climate future by setting bold GHG reduction targets, issuing transition plans on how they will meet those targets, and disclosing their progress to external stakeholders.”
Patricia Pina, Chief Research Officer at sustainability technology firm Clarity AI, said sustainability-related risks, including physical climate risk, were being priced in by capital markets, regardless of shifts in federal policy, warning that regulatory divergence added to company costs arising from investor demands for transparency and resilience.
“Forward-thinking businesses should base their strategies on economic realities rather than temporary political constructs, preparing themselves to remain competitive in the global market of the future,” she said.
“A prudent strategy is to build resilient, data-driven programmes that can flex with policy shifts. Companies that anchor their approach in science, risk management, and global market expectations, rather than short-term political cycles, will be better positioned to protect long-term value and maintain investor confidence.”
