[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 su