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ESG Newsletter published on July 1, 2021

Justice Concepts Integrated in Administration’s Environmental and Climate Initiatives


  • The Biden administration is addressing climate issues on a number of fronts.
  • The proposals consistently address themes of environmental justice and climate justice.
  • Our research teams track both concepts, even as understanding of their materiality evolves.

Breckinridge investment team members explored prospects for legislation and regulation related to key Biden administration environmental- and climate-related initiatives in Breckinridge’s spring ESG Newsletter. In this issue, members of our credit research teams discuss concepts of environmental justice (EJ) and climate justice (CJ) that are integrated in the administration’s efforts. Participants included Co-Heads, Research, Nicholas Elfner and Adam Stern, Director, ESG Research, Robert Fernandez, and Director, Municipal Research, Andrew Teras.

Rob: The Biden Administration’s climate initiatives remain front and center on the policymaking front. The announcements consistently address EJ and CJ. I sometimes wonder if market participants are familiar with those concepts.

Andrew: The trend continued on May 24, 2021. Ahead of the summer hurricane and wildfire season, the administration is doubling spending to help communities mitigate summer hurricane and wildfire risks. The announcement noted that the money would help communities, “including those too often overlooked.”

Nick: Comments from the President and cabinet members acknowledge research that shows not all people bear an equal amount of the burden posed by environmental concerns and climate change. The majority of the impacts are felt in vulnerable communities. It may be worth reviewing the terms.

Adam: The Environmental Protection Agency (EPA) defines EJ as the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income when it comes to developing, implementing, and enforcing environmental laws, regulations, and policies.

The EPA has had an office of Environmental Justice since the early 1990s.

Climate Justice is a kind of subset of EJ. It’s concerned with local climate impacts, particularly as they relate to traditionally vulnerable or marginalized groups living in specific areas, and the importance of community voice.

Rob: EJ and CJ both begin from the ideas that not all people are equally impacted by environmental and climate concerns, including climate change, urban heat islands, extreme weather events, poor air or lack of water or poor water quality due pollution or deteriorating infrastructure.

Andrew: I am often asked by investors for examples that illustrate inequity in the impact of environmental and climate issues within the context of infrastructure. I point to incidents like the contaminated water crisis in Flint, Michigan, where the population was predominantly minority and 40 percent poor.

Nick: Examples of inequity also are ingrained in the growth of industry in the country. USA Today recently published a report discussing a region along the Mississippi River in Louisiana where petrochemical plants are located. The population is largely Black, and the area is colloquially known as Cancer Alley.

Rob: These examples and others like them are the consequence of longstanding issues that frequently were shaped by historical conditions like redlining or economic development projects that had negative outcomes for the people who live in the area.

Adam: We’re starting to see more municipalities and corporations trying to address these types of issues under the umbrella of more equitable and inclusive growth. For example, anecdotally, more water utilities are inching toward income-support programs for rising utility bills. More cities are considering greening efforts. That can mean more trees or park space in more neighborhoods, which tend to be associated with less asthma, lower stress levels, and lower temperatures. Sometimes, communities are issuing debt to fund these strategies, whether directly or indirectly.

Whether these efforts materiality impact credit quality remains an open question and is one that is unlikely to be answered anytime soon.

For example, one issue is whether remediating EJ issues will make these communities sufficiently more competitive, regardless of the moral issues involved. For every community that opts to address EJ issues, there’s another that attracts capital and business growth by largely ignoring them. Washoe County, NV, is nice example. That area is growing rapidly thanks to an extremely light-touch regulatory and tax environment. Washoe County can easily avoid the deliberation and equal-access requirements that characterize good EJ-focused economic development planning. So, it may turn out that addressing EJ issues are necessary, but not sufficient, to promote long-term credit health.

Andrew: The Biden administration is proposing a wide range of infrastructure projects that can help mitigate or reverse negative effects of environmental concerns on cities, regions, and people. Its announcements suggest that it would approach these projects, if approved, with an eye to address the historic inequities that are contemplated in the EJ and CJ concepts.

(See list of announcements and initiatives accompanying this article for examples.)

Nick: Governmental agencies are reporting on their approach to justice concepts. The Department of Transportation has established an equity council. The Department of Energy website describes tactics for implementing EJ, including community engagement initiatives and efforts to deliver resources to overburdened, underserved, and economically distressed communities. The EPA established an Office of Environmental Justice.

Rob: For Breckinridge, as we consider investments in municipalities and businesses, but, to your point Adam, clients want to understand if and how these types of issues are material to our investment process.

Adam: Right. One way to think about it, purely from a credit standpoint, is that it makes sense to be exploring the questions around EJ. First, communities think these issues are important, and some are spending scarce resources on them. So, investors need to be aware of them, as well. Second, I think it is intuitive that addressing the health of a population could lead to more sustainable and resilient communities, over time. We integrate these kinds of considerations in our city/county frameworks.

In this context, the administration’s infrastructure proposals could help some communities, over the long term. But again, we don’t really know yet. As an initial matter, any new federal support will need to be spent on the right priorities and projects.

Nick: Industry is a key player. We assess the environmental and climate-related initiatives of companies in our environmental, social and governance analysis and in our engagement meetings with corporate managements. Those companies that publish corporate sustainability reports often document these efforts and their progress. Companies that work within their communities to ensure that all voices are heard, and inequities are addressed or avoided often are building more sustainable business models.

Andrew: For businesses and municipalities, EJ and CJ principles can be achieved when stakeholders make them a priority in ways that are economically and operationally feasible.


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DISCLAIMER: The opinions and views expressed are those of Breckinridge Capital Advisors, Inc. They are current as of the date(s) indicated but are subject to change without notice. Any estimates, targets, and projections are based on Breckinridge research, analysis and assumptions. No assurances can be made that any such estimate, target or projection will be accurate; actual results may differ substantially.

Nothing contained herein should be construed or relied upon as financial, legal or tax advice. All investments involve risks, including the loss of principal. Investors should consult with their financial professional before making any investment decisions.

While Breckinridge believes the assessment of ESG criteria can improve overall credit risk analysis, there is no guarantee that integrating ESG analysis will provide improved risk-adjusted returns over any specific time period.

Some information has been taken directly from unaffiliated third-party sources. Breckinridge believes such information is reliable but does not guarantee its accuracy or completeness.

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