DoD doubles links between climate change and national security | Stroock & Stroock & Lavan LLP

The Committee on Foreign Investment in the United States (CFIUS), chaired by the Secretary of the Treasury, examines the national security implications of investments that could result in foreign control of U.S. companies – or, in some cases, that could provide foreigners with access to critical data and sensitive personal information. Agreements deemed threatening to national security can be blocked by the president.

Presidential vetoes are rare, but many agreements are restructured to address CFIUS concerns. The CFIUS also has the power to issue mitigation orders, including divestiture of sensitive assets, changes in corporate governance, restrictions on foreign sources of supply and bans on the appointment of foreign persons. in key leadership positions. For these reasons, it is essential that investors conduct a rigorous national security review of proposed transactions.

“National security” is, however, an undefined term in the laws governing CFIUS. It is not an oversight. To avoid “fighting the last war,” Congress gave CFIUS carte blanche to view “national security” as an evolving concept, recognizing that threats change over time. To factors critical to all national security reviews (e.g., export controlled technology, classified contracts, impact on critical infrastructure, access to critical information) we can now add an additional consideration : “environmental stewardship”.

In October 2014, the US Department of Defense (DoD) released a groundbreaking report highlighting the impact of climate change on national security.[1] Announcing the report, then Defense Secretary Chuck Hagel noted that “[r]Rising global temperatures, changing precipitation, rising sea levels and more extreme weather events will intensify the challenges of global instability, hunger, poverty and conflict. In a strangely prescient statement, Hagel called climate change a “threat multiplier,” adding that it “has the potential to exacerbate many of the challenges we face today – from infectious disease to terrorism.[2] [Emphasis added.]

President Obama followed up with a presidential memorandum in 2016 calling on federal agencies to ensure that “the impacts of climate change are fully considered in the development of national security doctrine, policies and plans.”[3] The memorandum cited a contemporary report from the National Intelligence Council, which found that “climate change and its resulting effects are likely to pose far-reaching national security challenges for the United States and other countries over the next 20 years. years through a number of paths, “[4] including large-scale political instability resulting from loss of arable land and climate-related disasters.

Recently, the DoD released a Climate Risk Analysis (DCRA) that duplicates the 2016 memorandum.[5] DCRA finds that climate change, including unpredictable extreme weather, “exacerbates existing risks and creates new security challenges for US interests” and poses increasing risks to “strategies, plans, capabilities, missions and equipment. of the DOD, as well as those of Allies and partners of the United States… ”The DoD is committed to addressing the effects of climate change“ at all levels of the DoD enterprise ”.

The DoD report comes in response to an executive order issued by President Biden to place “the climate crisis at the center of US foreign and national security policy.”[6] For its part, the United States Department of the Treasury has issued a “Climate Action Plan” which, among other things, promises to address “the impacts and vulnerabilities of climate change across all ministerial operations, including administrative, manufacturing and law enforcement activities. . “[7] Outlining its climate change response efforts, the Treasury pledges to use “the leadership and commitment of the United States to dramatically improve global action and mobilize and align financial flows to combat climate change and improve resilience in the new climatic environment ”.

Today, climate change is at the center of the concerns of security agencies – and may well emerge as an issue in CFIUS reviews. To be clear, we don’t think CFIUS will start cleaning up deals for minor regulatory missteps. “Critical infrastructure,” however, has been a long-standing concern for CFIUS, and is now enshrined in law. In a national security review of a proposed acquisition, a poor record of compliance with environmental laws can be considered a “threat multiplier” – even if the acquirer is from an allied country.

CFIUS reviews of covered transactions may extend to subsidiaries and foreign assets of a US target if those foreign companies could pose a threat to US national security. The DCRA and other studies linking global climate change to U.S. national security suggest that CFIUS will carefully consider the environmental impact of an acquisition if it has potential implications for U.S. national security. United States, although the impact occurs outside of the United States. For example, a poor environmental record could negatively influence the review of acquisitions in the timber, gas, petroleum or coal industries – or acquisitions involving the management of water or land in an area with a fragile ecosystem. . Conversely, an investor with an exemplary environmental compliance record might be in a strong position if he seeks to acquire a company with a weak track record – and can make a plausible claim that he will improve the performance of the company. target.

The key point is this: environmental issues may or may not dominate CFIUS reviews, but they will be relevant – as DCRA and similar studies clearly show – and a poor environmental record could tip the scales against a foreign investor.

Mark Twain said “Everyone talks about the weather, but nobody does anything about it”. It may change.

[1] United States Department of Defense, “2014 Climate Change Adaptation Roadmap,” October 2014, available at: https://www.acq.osd.mil/eie/downloads/CCARprint_wForward_e.pdf.

[2] United States Department of Defense, Press Release, “DoD Releases 2014 Climate Change Adaptation Roadmap,” October 13, 2014, available at: https://www.defense.gov/News/Releases/Release/Article/605221, and US Department of Defense, Office of the Secretary of Defense, “Speech Before the Conference of Defense Ministers of the Americas,” October 13, 2014, available at: https://www.defense.gov/News/Speeches/Speech/Article / 605617 /.

[3] The White House, Office of the Press Secretary, “Presidential Memorandum – Climate Change and National Security”, September 21, 2016, available at: https://obamawhitehouse.archives.gov/the-press-office/2016/09/ 21 / presidential-memorandum-climate-change-and-national-security.

[4] National Intelligence Council: “Memorandum – Implications for US National Security of Anticipated Climate Change,” September 21, 2016, available at: https://www.dni.gov/files/documents/Newsroom/Reports%20and%20Pubs/Implications_for_US_National_Security_of_Anticipated_Climate_Change. pdf.

[5] United States Department of Defense, “Department of Defense Climate Risk Analysis,” October 2021, available at: https://media.defense.gov/2021/Oct/21/2002877353/-1/-1/0/ DOD-CLIMATE- RISK-ANALYSIS-FINAL.PDF.

[6] The White House, Office of the Press Secretary, “Executive Order on Tackling the Climate Crisis at Home and Abroad,” January 27, 2021, available at: https://www.whitehouse.gov/briefing-room/presidential-actions/ 2021 / 01/27 / executive-order-on-tackling-the-climate-crisis-at-home-and-abroad /.

[7] United States Department of the Treasury, “Treasury Climate Action Plan,” July 2021, available at: https://home.treasury.gov/system/files/136/Treasury-Climate-Ation-Plan-July-2021-Final .pdf.

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