No official summary available for this bill.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 1471 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 1471
To require the Board of Governors of the Federal Reserve System, in
consultation with the heads of other relevant Federal agencies, to
develop and conduct financial risk analyses relating to climate change,
and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 10, 2025
Mr. Schatz (for himself, Ms. Warren, Mr. Merkley, Mr. Van Hollen, Mr.
Whitehouse, Mrs. Murray, Mr. Heinrich, and Mr. Booker) introduced the
following bill; which was read twice and referred to the Committee on
Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To require the Board of Governors of the Federal Reserve System, in
consultation with the heads of other relevant Federal agencies, to
develop and conduct financial risk analyses relating to climate change,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Climate Change Financial Risk Act of
2025''.
SEC. 2. SENSE OF CONGRESS.
It is the sense of Congress that--
(1) 2024 was the warmest year on record globally and the
first calendar year that the average global temperature
exceeded 1.5 degrees Celsius above pre-industrial levels;
(2) if current trends continue, average global temperatures
over the long term are likely to surpass 1.5 degrees Celsius
above pre-industrial levels between 2030 and 2050;
(3) global temperature rise has already resulted in an
increased number of heavy rainstorms, coastal flooding events,
heat waves, hurricanes, wildfires, and other extreme events;
(4) since 1980--
(A) the number of extreme weather events per year
that cost the people of the United States more than
$1,000,000,000 per event, accounting for inflation, has
increased significantly; and
(B) the total cost of extreme weather events in the
United States has exceeded $2,915,000,000,000;
(5) as physical impacts from climate change are manifested
across multiple sectors of the economy of the United States--
(A) climate-related economic risks will continue to
increase;
(B) climate-related extreme weather events will
disrupt energy and transportation systems in the United
States, which will result in more frequent and longer-
lasting power outages, fuel shortages, and service
disruptions in critical sectors across the economy of
the United States;
(C) projected increases in extreme heat conditions
will lead to decreases in labor productivity in
agriculture, construction, and other critical economic
sectors;
(D) food and livestock production will be impacted
in regions that experience increases in heat and
drought, and small rural communities will struggle to
find the resources needed to adapt to those changes;
and
(E) sea level rise and more frequent and intense
extreme weather events will--
(i) increasingly disrupt and damage private
property and critical infrastructure;
(ii) drastically increase insured and
uninsured losses; and
(iii) cause supply chain disruptions;
(6) advances in energy efficiency and renewable energy
technologies, as well as climate policies and shifting societal
preferences, will--
(A) reduce global demand for fossil fuels; and
(B) expose transition risks for fossil fuel
companies and investors domestically and globally, and
for companies and investors in other energy-intensive
industries, which could include trillions of dollars of
stranded assets around the world;
(7) climate change poses uniquely far-reaching risks to the
financial services industry, including with respect to credit,
counterparty, and market risks, due to the number of sectors
and locations impacted and the potentially irreversible scale
of damage;
(8) weaknesses in how a financial institution identifies,
measures, monitors, and controls for the physical risks and
transition risks associated with climate change could adversely
affect the safety and soundness of a financial institution;
(9) financial institutions must take a consistent approach
to assessing climate-related financial risks and incorporating
those risks into existing risk management practices, which
should be informed by scenario analysis;
(10) the Board of Governors conducts annual assessments of
the capital adequacy and capital planning practices of the
largest and most complex banking organizations (referred to in
this section as ``stress tests'') in order to promote a safe,
sound, and efficient banking and financial system;
(11) as of the date of enactment of this Act--
(A) the stress tests conducted by the Board of
Governors are not designed to reflect the physical
risks or transition risks posed by climate change; and
(B) the Board of Governors has conducted 1 pilot
climate scenario analysis exercise with only 6 United
States banking organizations;
(12) the Board of Governors--
(A) has stated that economic effects of climate
change and the transition to a lower carbon economy
pose an emerging risk to the safety and soundness of
financial institutions and the financial stability of
the United States;
(B) has the authority under section 39 of the
Federal Deposit Insurance Act (12 U.S.C. 1831p-1) and
section 165 of the Financial Stability Act of 2010 (12
U.S.C. 5365) to take into account the potentially
systemic impact of climate-related risks on the
financial system to preserve the safety and soundness
of supervised institutions and the financial stability
of the United States; and
(C) should develop new analytical tools with longer
time horizons to accurately assess and manage the risks
described in subparagraph (B);
(13) the Climate-Related Market Risk Subcommittee of the
Commodity Futures Trading Commission has identified the
importance of researching ``climate-related `sub-systemic'
shocks to financial markets and institutions in particular
sectors and regions of the United States''; and
(14) the Financial Stability Oversight Council likewise
identified ``[c]limate change [a]s an emerging threat to the
financial stability of the United States'' and recommended that
members of the Council, including the Board of Governors, take
action to ``strengthen the financial system and make it more
resilient to climate-related shocks and vulnerabilities''.
SEC. 3. DEFINITIONS.
In this Act:
(1) Bank holding company.--The term ``bank holding
company'' has the meaning given the term in section 102(a) of
the Financial Stability Act of 2010 (12 U.S.C. 5311(a)).
(2) Board of governors.--The term ``Board of Governors''
means the Board of Governors of the Federal Reserve System.
(3) Climate science leads.--The term ``climate science
leads'' means--
(A) the Administrator of the National Oceanic and
Atmospheric Administration;
(B) the Administrator of the Environmental
Protection Agency;
(C) the Secretary of Energy;
(D) the Assistant Secretary for the Office of
International Affairs of the Department of Energy;
(E) the Administrator of the National Aeronautics
and Space Administration;
(F) the Assistant Secretary for the Bureau of
Oceans and International Environmental and Scientific
Affairs of the Department of State;
(G) the Director of the United States Geological
Survey;
(H) the Secretary of the Interior;
(I) the Director of the National Climate
Assessment;
(J) the individual from the United States elected
to the Intergovernmental Panel on Climate Change
Bureau;
(K) the Permanent Representative of the United
States to the World Meteorological Organization; and
(L) the head of any other Federal agency that the
Board of Governors determines to be appropriate.
(4) Covered entity.--The term ``covered entity'' means--
(A) a nonbank financial company or bank holding
company that has not less than $250,000,000,000 in
total consolidated assets; and
(B) a nonbank financial company or bank holding
company--
(i) that has not less than $100,000,000,000
in total consolidated assets; and
(ii) with respect to which the Board of
Governors determines the application of
subparagraph (C) of section 165(i)(1) of the
Financial Stability Act of 2010 (12 U.S.C.
5365(i)(1)), as added by section 6 of this Act,
is appropriate--
(I) to--
(aa) prevent or mitigate
risks to the financial
stability of the United States;
or
(bb) promote the safety and
soundness of the company; and
(II) after taking into
consideration--
(aa) the capital structure,
riskiness, complexity,
financial activities, and size
of the company, including the
financial activities of any
subsidiary of the company; and
(bb) any other risk-related
factor that the Board of
Governors determines to be
appropriate.
(5) Nonbank financial company.--The term ``nonbank
financial company'' has the meaning given the term in section
102(a)(4)(C) of the Financial Stability Act of 2010 (12 U.S.C.
5311(a)(4)(C)).
(6) Physical risks.--The term ``physical risks'' means
financial risks to assets, locations, operations, or value
chains that result from exposure to physical, climate-related
effects, including from--
(A) increased average global temperatures;
(B) increased severity and frequency of extreme
weather events;
(C) increased flooding;
(D) sea level rise;
(E) ocean acidification;
(F) increased severity and frequency of heat waves;
(G) increased frequency of wildfires;
(H) decreased arability of farmland; and
(I) decreased availability of fresh water.
(7) Surveyed entity.--The term ``surveyed entity'' means a
bank holding company, nonbank financial company, or other
entity that--
(A) is supervised by the Board of Governors, the
Office of the Comptroller of the Currency, or the
Federal Deposit Insurance Corporation;
(B) has total consolidated assets of not less than
$10,000,000,000; and
(C) is not a covered entity.
(8) Technical development group.--The term ``Technical
Development Group'' means the Climate Risk Scenario Technical
Development Group established under section 4(a).
(9) Transition risks.--The term ``transition risks'' means
financial risks that are attributable to climate change
mitigation and adaptation, including efforts to reduce
greenhouse gas emissions and strengthen resilience to the
impacts of climate change, including--
(A) costs relating to--
(i) international treaties and agreements;
(ii) Federal, State, and local policies;
(iii) new technologies;
(iv) changing markets;
(v) reputational impacts relevant to
changing consumer behavior; and
(vi) litigation; and
(B) a loss in the value, or the stranding, of
assets due to any of the costs described in
subparagraph (A).
(10) Value chain.--The term ``value chain''--
(A) means the total lifecycle of a product or
service, both before and after production of the
product or service, as applicable; and
(B) may include the sourcing of materials,
production, and disposal with respect to the product or
service described in subparagraph (A).
SEC. 4. CLIMATE RISK SCENARIO TECHNICAL DEVELOPMENT GROUP.
(a) Establishment.--The Board of Governors shall establish a
technical advisory group to be known as the ``Climate Risk Scenario
Technical Development Group''.
(b) Membership.--
(1) Composition.--The Technical Development Group shall be
composed of 10 members--
(A) 5 of whom shall be climate scientists, with a
demonstrated record of peer-reviewed publications and
professional contributions to climate modeling, climate
risk assessment, or related areas; and
(B) 5 of whom shall be economists, with expertise
in either the United States financial system or the
financial risks posed by climate change.
(2) Selection.--The Board of Governors shall select the
members of the Technical Development Group after consultation
with the climate science leads.
(c) Duties.--The Technical Development Group shall--
(1) provide recommendations to the Board of Governors
regarding the development of, and updates to, the climate
change risk scenarios under section 5;
(2) after the establishment of the climate change risk
scenarios under section 5, determine the financial and economic
risks resulting from those scenarios;
(3) make any final work product, and any information used
in the development of the final work product, publicly
available;
(4) provide technical assistance to covered entities in
assessing physical risks or transition risks; and
(5) provide publicly available resources to entities that
are not covered entities to help those entities assess physical
risks and transition risks.
(d) Prohibition on Compensation.--Members of the Technical
Development Group shall serve without pay.
(e) Inapplicability of Chapter 10 of Title 5, United States Code.--
Chapter 10 of title 5, United States Code, shall not apply with respect
to the Technical Development Group.
SEC. 5. DEVELOPMENT AND UPDATING OF CLIMATE CHANGE RISK SCENARIOS.
(a) In General.--
(1) Initial development.--Not later than 1 year after the
date of enactment of this Act, the Board of Governors, in
coordination with the climate science leads, and taking into
consideration the recommendations of the Technical Development
Group, shall develop 3 separate climate change risk scenarios
as follows:
(A) One scenario that assumes an average increase
in global temperatures of 1.5 degrees Celsius above
pre-industrial levels.
(B) One scenario that assumes an average increase
in global temperatures of 2 degrees Celsius above pre-
industrial levels.
(C) One scenario that--
(i) assumes the likely and very likely
average increase in global temperatures that
can be expected, taking into consideration the
extent to which national policies and actions
relating to climate change have been
implemented, as of the date on which the
scenario is developed; and
(ii) does not take into consideration
commitments for national policies and actions
relating to climate change that, as of the date
described in clause (i), have not been
implemented.
(2) International coordination.--In developing and updating
the 3 scenarios required under this subsection, the Board of
Governors shall take into consideration analytical tools and
best practices developed by international banking supervisors
relating to climate risks and scenario analysis in an effort to
develop consistent and comparable data-driven scenarios.
(3) Recommendations.--If the Technical Development Group
determines that the average increase in global temperatures
described in subparagraph (A) or (B) of paragraph (1) is no
longer scientifically valid, the Technical Development Group
may recommend that the Board of Governors, in coordination with
the climate science leads, update the average increase in
global temperatures described in the applicable subparagraph to
reflect the most current assessment of climate change science.
(b) Considerations.--In developing and updating each of the 3
scenarios required under subsection (a), the Board of Governors, in
coordination with the climate science leads, shall account for physical
risks and transition risks that may disrupt business operations across
the global economy, including through--
(1) disruptions with respect to--
(A) the sourcing of materials;
(B) production;
(C) transportation; and
(D) the disposal of products and services;
(2) changes in the availability and prices of raw materials
and other inputs;
(3) changes in agricultural production and with respect to
food security;
(4) direct damages to fixed assets;
(5) increases in costs associated with insured or uninsured
losses;
(6) changes in asset values;
(7) impacts on--
(A) aggregate demand for products and services;
(B) labor productivity;
(C) asset liquidity; and
(D) credit availability;
(8) mass migration and increases in disease and mortality
rates;
(9) international conflict, as such conflict relates to
global economic activity and output; and
(10) changes in any other microeconomic or macroeconomic
condition that the Board of Governors, in coordination with the
climate science leads, determines to be relevant.
SEC. 6. CLIMATE-RELATED ENHANCED SUPERVISION FOR CERTAIN NONBANK
FINANCIAL COMPANIES AND BANK HOLDING COMPANIES.
Section 165(i)(1) of the Financial Stability Act of 2010 (12 U.S.C.
5365(i)(1)) is amended--
(1) in subparagraph (B)(i), by inserting ``except as
provided in subparagraph (C)(ii)(I),'' before ``shall
provide''; and
(2) by adding at the end the following:
``(C) Biennial tests required.--
``(i) Definitions.--In this subparagraph--
``(I) the term `capital
distribution' has the meaning given the
term in section 225.8(d)(4) of title
12, Code of Federal Regulations, as in
effect on the date of enactment of this
subparagraph;
``(II) the term `capital policy'
has the meaning given the term in
section 225.8(d)(7) of title 12, Code
of Federal Regulations, as in effect on
the date of enactment of this
subparagraph; and
``(III) the terms `climate science
leads' and `covered entity' have the
meanings given those terms in section 3
of the Climate Change Financial Risk
Act of 2025.
``(ii) Tests.--
``(I) In general.--The Board of
Governors, in coordination with the
appropriate primary financial
regulatory agencies and the climate
science leads, shall conduct biennial
analyses in which each covered entity
shall be subject to evaluation, under
an adverse set of conditions, of
whether that covered entity has the
capital, on a total consolidated basis,
necessary to absorb financial losses
that would arise under each climate
change risk scenario developed under
section 5 of the Climate Change
Financial Risk Act of 2025.
``(II) Initial tests.--With respect
to each of the first 3 analyses
conducted under subclause (I)--
``(aa) the covered entity
to which such an analysis
applies shall not be subject to
any adverse consequences as a
result of the analysis; and
``(bb) the Board of
Governors shall--
``(AA) not later
than 60 days after the
date on which the Board
of Governors completes
the analysis, make a
summary of the analysis
publicly available; and
``(BB) submit a
copy of the results of
the analysis to the
Committee on Banking,
Housing, and Urban
Affairs of the Senate
and the Committee on
Financial Services of
the House of
Representatives.
``(III) Climate risk resolution
plan.--
``(aa) In general.--Except
with respect to the first
analysis conducted under
subclause (I), each covered
entity shall, before being
subject to an analysis under
that subclause, submit to the
Board of Governors a resolution
plan with respect to climate
risk planning (referred to in
this subclause as a `climate
risk resolution plan'), which
shall be based on the results
of the most recently conducted
analysis of the covered entity
under that subclause.
``(bb) Contents.--Each
climate risk resolution plan
required under item (aa) shall
include--
``(AA) a capital
policy with respect to
climate risk planning;
and
``(BB) qualitative
and quantitative
targets for balance
sheet and off-balance
sheet exposures, and
other business
operations, that remedy
vulnerabilities
identified in the most
recently conducted
analysis of the
applicable covered
entity under subclause
(I).
``(cc) Rejection.--The
Board of Governors may object
to a climate risk resolution
plan submitted by a covered
entity under item (aa) if the
Board of Governors determines
that--
``(AA) the covered
entity has not
demonstrated that such
plan is reasonable to
maintain capital above
each minimum regulatory
capital ratio on a pro
forma basis under the
adverse set of
conditions described in
subclause (I);
``(BB) the climate
risk resolution plan is
otherwise not
reasonable or
appropriate, including
because the climate
risk resolution plan no
longer provides fair
services to vulnerable
and disadvantaged
communities;
``(CC) the
assumptions and
analysis underlying the
climate risk resolution
plan, or the
methodologies and
practices that support
that plan, are not
reasonable or
appropriate; or
``(DD) the climate
risk resolution plan
otherwise constitutes
an unsafe or unsound
practice.
``(dd) General distribution
limitation.--If the Board of
Governors objects to a climate
risk resolution plan submitted
by a covered entity under item
(aa), the covered entity may
not make any capital
distribution, other than a
capital distribution arising
from the issuance of a
regulatory capital instrument
eligible for inclusion in the
numerator of a minimum
regulatory capital ratio.''.
SEC. 7. SUB-SYSTEMIC EXPLORATORY SURVEY.
(a) Development of Survey.--The Board of Governors, in consultation
with the Comptroller of the Currency and the Board of Directors of the
Federal Deposit Insurance Corporation, shall develop a survey to
assess--
(1) the ability of surveyed entities to withstand each
climate risk scenario developed under section 5;
(2) which surveyed entities possess a large concentration
of business activities in geographical areas or industries that
are significantly exposed to the short- and long-term impacts
of climate change; and
(3) how the surveyed entities identified under paragraph
(2) plan to make adaptations to the business models and capital
planning of those entities in response to the risks presented
in each climate change risk scenario developed under section 5.
(b) Administration of Survey.--
(1) Initial administration.--
(A) In general.--Not later than 1 year after the
completion of the first analysis under subparagraph (C)
of section 165(i)(1) of the Financial Stability Act of
2010 (12 U.S.C. 5365(i)(1)), as added by section 6 of
this Act, the Board of Governors, in consultation with
the Comptroller of the Currency and the Board of
Directors of the Federal Deposit Insurance Corporation,
shall administer the survey developed under subsection
(a) to each surveyed entity.
(B) Assessment and report.--Not later than 18
months after the date on which the Board of Governors
completes the administration of the survey under
subparagraph (A), the Board of Governors shall publicly
release a report that--
(i) summarizes the results of the survey;
and
(ii) analyzes whether the planned actions
of the surveyed entities, in the aggregate, are
plausible and would be effective.
(2) Subsequent administration.--
(A) In general.--Not later than 2 years after the
date on which the Board of Governors releases the
report required under paragraph (1)(B), and biennially
thereafter, the Board of Governors shall readminister
to each surveyed entity the survey developed under
subsection (a).
(B) Subsequent report.--Not later than 180 days
after the date on which each survey described under
subparagraph (A) is completed, the Board of Governors
shall publicly release a report that summarizes the
results of the survey, which shall include the analysis
described in paragraph (1)(B)(ii).
(c) Effect of Survey Participation.--In any report released with
respect to a survey conducted under this section, the Board of
Governors may not identify any individual surveyed entity that
responded to the survey.
(d) Rule of Construction.--Nothing in this section may be construed
to preclude the Board of Governors from pursuing an enforcement action
against a surveyed entity because of a violation discovered by the
Board of Governors during an examination of the surveyed entity that is
independent of a survey administered under this section.
<all>
Introduced in Senate
Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
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