Biden just released a plan to protect Americans' retirements and savings from the 2 main financial risks of the climate crisis

• Last month, Biden promised a plan to protect Americans' retirements and savings from the climate crisis.
• The climate crisis poses physical risks to assets, and transition risks from shifting investments to a green economy.

As the world transitions to a green economy to fight the climate crisis, Americans' investments in more traditional industries could lose their value, affecting physical assets and retirement plans.

The Biden administration just released a plan to prevent that.

President Joe Biden pledged to combat the climate crisis during his campaign, and after leaving the United Nations climate summit in Glasgow earlier this month, those promises were reinforced not only to Americans, but to the world.

In May, Biden signed an executive order dedicated to analyzing and mitigating the risk the climate crisis poses to homeowners, businesses, consumers, and the government. And in October, he followed up on that order with a 40-page report titled "A Roadmap to Build a Climate-Resilient Economy," which focuses on mitigating the financial risks climate change puts on people's retirements, pensions, savings, and more.

The report noted that Wall Street financial models and investments portfolios that manage assets for millions of Americans are relying on a stable climate when making decisions, making those investments vulnerable to two main financial risks: physical and transition.

Physical risk refers to the "intensifying impacts on climate change" like extreme weather, according to the report, that present risk to assets like real estate and infrastructure, private investments like university endowments, and companies' telecommunication and data infrastructure. Transition risk refers to costs incurred during the shift away from investments in carbon-focused economies like coal infrastructure toward clean energy, like wind and solar.

Here's how Biden's administration plans to protect Americans from those risks:

• The Department of Labor (DOL) is leading an effort to ensure employee benefit plan managers can incorporate climate-related risks into investment decisions;
• DOL will enhance efforts to increase awareness and promote relevant training for incorporating climate risks into financial decisions;
• And the DOL is conducting its own legal analysis of existing authority to address climate-related financial risks to employee retirement plans under the Federal Employees' Retirement Savings Act, which will be submitted to Biden this month.

These actions will closer align the US with other countries, like the United Kingdom, that have already taken steps to incorporate climate-related risks into retirement and saving plans.

The report, which White House National Economic Council Director Brian Deese and White House National Climate Advisor Gina McCarthy signed off on, outlined a "whole-of-government" approach to promoting the resilience of the US financial system to climate-related risks that the US can implement when following through on its goals to reduce carbon emissions and become a completely green economy.

"Protecting the financial health of American households, decarbonizing the United States, and building an economy from the bottom-up and the middle-out all go hand-in-hand," Deese and McCarthy wrote in the report. "This has been a point of emphasis for the President since his very first day in office, and it will remain an important unifying theme in the days ahead."

As Insider previously reported, transitioning to a green economy may hurt Americans in the short-term. Bank of America economist Ethan Harris wrote in an October note that economic growth may be stunted "during the transition from a dirty to green economy" because workers will need to move from one sector to another.

But it will be well worth it. The United Nations in August released a harrowing report saying some of global warming's effects will be "irreversible for centuries to millennia," emphasizing how there's no time to wait when it comes to addressing climate change.

And along with reaching an agreement with world leaders to cut methane emissions by 30% by 2030 in Glasgow, Biden has also dedicated $555 billion in his Build Back Better framework to fight the climate crisis — the largest investment in the bill that Democrats are hoping to pass this week.

"It isn't just our moral obligation to combat climate change — it's an economic imperative," Biden wrote on Twitter. "The future will belong to those who act now to harness the power of a clean energy economy."