Addressing Climate Financial Risk Act of 2021

II 117TH CONGRESS 1ST SESSION S. 588 To establish the Advisory Committee on Climate Risk on the Financial Stability Oversight Council. IN THE SENATE OF THE UNITED STATES MARCH 4, 2021 Mrs. FEINSTEIN (for herself, Ms. CORTEZ MASTO, Mr. PADILLA, Mr. SCHATZ, Ms. WARREN, Mr. HEINRICH, and Mr. MERKLEY) introduced the fol- lowing bill; which was read twice and referred to the Committee on Bank- ing, Housing, and Urban Affairs A BILL To establish the Advisory Committee on Climate Risk on the Financial Stability Oversight Council. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Addressing Climate 4 Financial Risk Act of 2021’’. 5 SEC. 2. ADVISORY COMMITTEE ON CLIMATE RISK. 6 (a) IN GENERAL.—Subtitle A of the Financial Sta- 7 bility Act of 2010 (12 U.S.C. 5321 et seq.) is amended 8 VerDate Sep 11 2014 23:54 Apr 01, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S588.IS S588 pbinns on DSKJLVW7X2PROD with BILLS 2 •S 588 IS by inserting after section 121 (12 U.S.C. 5331) the fol- 1 lowing: 2 ‘‘SEC. 121A. ADVISORY COMMITTEE ON CLIMATE RISK. 3 ‘‘(a) ESTABLISHMENT.—There is established in the 4 Council the Climate Risk Advisory Committee, which 5 shall— 6 ‘‘(1) consult with the Council in the drafting by 7 the Council of an annual report on climate risk re- 8 quired under subsection (e) and other climate risk 9 matters; and 10 ‘‘(2) meet with the Council not less frequently 11 than once per year. 12 ‘‘(b) MEMBERSHIP.— 13 ‘‘(1) IN GENERAL.—The Committee shall con- 14 sist of the following members: 15 ‘‘(A) Four members who are climate 16 science experts, of whom— 17 ‘‘(i) 1 shall be appointed by the Sec- 18 retary of Energy; 19 ‘‘(ii) 1 shall be appointed by the Ad- 20 ministrator of the Environmental Protec- 21 tion Agency; and 22 ‘‘(iii) 2 shall be appointed by the Di- 23 rector of the National Science Foundation. 24 VerDate Sep 11 2014 23:54 Apr 01, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S588.IS S588 pbinns on DSKJLVW7X2PROD with BILLS 3 •S 588 IS ‘‘(B) Eight members who are experts in 1 climate economics or climate financial risk ap- 2 pointed by the Council, of whom not fewer than 3 1 member is each an expert in— 4 ‘‘(i) insurance; 5 ‘‘(ii) capital markets; 6 ‘‘(iii) banking; 7 ‘‘(iv) international financial markets; 8 ‘‘(v) housing; and 9 ‘‘(vi) the perspective of asset owners. 10 ‘‘(2) PROHIBITION.—No member of the Com- 11 mittee may be employed by a company within the ju- 12 risdiction of a member agency of the Council. 13 ‘‘(c) TERM.—The members of the Committee shall be 14 appointed for 3-year terms, except that the initial terms 15 of the first members of the Committee shall be staggered 16 so that— 17 ‘‘(1) 4 members serve terms of 3 years; 18 ‘‘(2) 4 members serve terms of 2 years; and 19 ‘‘(3) 4 members serve terms of 1 years. 20 ‘‘(d) CONSULTATION.—The Council shall consult 21 with the Committee in carrying out the requirements of 22 this section. 23 ‘‘(e) REPORT ON CLIMATE FINANCIAL RISK.—Not 24 later than 270 days after the date of enactment of this 25 VerDate Sep 11 2014 23:54 Apr 01, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S588.IS S588 pbinns on DSKJLVW7X2PROD with BILLS 4 •S 588 IS section, the Council shall, in coordination with the Com- 1 mittee and the Deputies Committee of the Council, publish 2 a report that— 3 ‘‘(1) assesses— 4 ‘‘(A) the potential impact of climate risk 5 on the financial stability of the United States; 6 ‘‘(B) the extent to which Federal and 7 State financial regulatory agencies have suffi- 8 cient expertise on climate risk; 9 ‘‘(C) the quality of data available to Coun- 10 cil members to properly assess climate financial 11 risk and any gaps in data that exist; 12 ‘‘(D) the extent to which supervised finan- 13 cial institutions are engaging in sound climate 14 risk management; 15 ‘‘(E) the degree of coordination among 16 Federal and State financial regulatory agencies 17 on climate risk; 18 ‘‘(F) the degree of coordination by Federal 19 and State financial regulatory agencies with 20 international financial regulatory authorities on 21 climate financial risk; 22 ‘‘(G) how U.S. climate financial risk disclo- 23 sure requirements compare to climate financial 24 VerDate Sep 11 2014 23:54 Apr 01, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S588.IS S588 pbinns on DSKJLVW7X2PROD with BILLS 5 •S 588 IS risk disclosure regimes in other countries and to 1 other regimes that are available; and 2 ‘‘(H) any other areas the Council believes 3 are important; and 4 ‘‘(2) provides recommendations based on the as- 5 sessments in paragraph (1) to Federal and State fi- 6 nancial regulatory agencies and to Congress on how 7 to improve the ability of the financial regulatory sys- 8 tem in the United States to identify and mitigate cli- 9 mate financial risk. 10 ‘‘(f) MEMBER AGENCIES.—Each member agency 11 should develop and make publicly available a strategy to 12 identify and mitigate climate financial risk within the ju- 13 risdiction of the member agency. 14 ‘‘(g) COORDINATION.—The Council should— 15 ‘‘(1) facilitate the sharing of best practices on 16 climate financial risk across agencies; and 17 ‘‘(2) assign the Office of Financial Research to 18 conduct ongoing research into climate financial risk. 19 ‘‘(h) INCLUSION IN ANNUAL REPORT.—The Council 20 shall include a section on climate financial risk in— 21 ‘‘(1) the annual report of the Council to Con- 22 gress; and 23 ‘‘(2) if relevant, in any other report to Con- 24 gress.’’. 25 VerDate Sep 11 2014 23:54 Apr 01, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S588.IS S588 pbinns on DSKJLVW7X2PROD with BILLS 6 •S 588 IS (b) TECHNICAL AND CONFORMING AMENDMENT.— 1 The table of contents of the Dodd-Frank Wall Street Re- 2 form and Consumer Protection Act in section 1(b) of that 3 Act is amended by inserting after the item relating to sec- 4 tion 121 the following: 5 ‘‘Sec. 121A. Advisory Committee on Climate Risk.’’. SEC. 3. UPDATE ON SUPERVISORY GUIDANCE ON CLIMATE 6 RISK. 7 (a) DEFINITION.—In this section, the term ‘‘Federal 8 banking agency’’ has the meaning given the term in sec- 9 tion 2 of the Dodd-Frank Wall Street Reform and Con- 10 sumer Protection Act (12 U.S.C. 5301). 11 (b) UPDATE.—Each Federal banking agency and the 12 National Credit Union Administration shall update appli- 13 cable supervisory guidance to include climate risk, includ- 14 ing credit, liquidity, market, operational, and reputational 15 risk to ensure that supervised financial institutions appro- 16 priately identify and mitigate climate financial risk. 17 (c) COORDINATION.—The Federal Financial Institu- 18 tions Examination Council shall ensure that the guidance 19 updated under subsection (b) is— 20 (1) appropriately coordinated among the Fed- 21 eral banking agencies and the National Credit Union 22 Administration; and 23 (2) shared with State regulators. 24 VerDate Sep 11 2014 23:54 Apr 01, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S588.IS S588 pbinns on DSKJLVW7X2PROD with BILLS 7 •S 588 IS SEC. 4. UPDATE NONBANK SIFI DESIGNATION GUIDANCE. 1 The Financial Stability Oversight Council shall up- 2 date subpart B of part 1310 of title 12, Code of Federal 3 Regulations, to specify how the Council will incorporate 4 climate risk into determinations described in that subpart. 5 SEC. 5. FIO REPORT ON INSURANCE REGULATION AND CLI- 6 MATE RISK. 7 Not later than 1 year after the date of enactment 8 of this Act, the Federal Insurance Office shall publish a 9 report that— 10 (1) assesses the potential impact of climate fi- 11 nancial risk on the insurance sector in the United 12 States; and 13 (2) recommends ways to modernize and improve 14 the system of climate risk insurance regulation in 15 the United States. 16 SEC. 6. IMPROVE GLOBAL COORDINATION. 17 It is the sense of Congress that relevant Federal fi- 18 nancial regulatory agencies and the Department of the 19 Treasury, if relevant, should— 20 (1) join the Network for Greening the Financial 21 System and other international organizations fo- 22 cused on climate financial risk; 23 (2) formally join the Task Force on Climate- 24 Related Financial Risks of the Basel Committee on 25 Banking Supervision; and 26 VerDate Sep 11 2014 23:54 Apr 01, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S588.IS S588 pbinns on DSKJLVW7X2PROD with BILLS 8 •S 588 IS (3) work with international regulators on cli- 1 mate financial risk whenever possible, consistent 2 with United States law. 3 Æ VerDate Sep 11 2014 23:54 Apr 01, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6301 E:\BILLS\S588.IS S588 pbinns on DSKJLVW7X2PROD with BILLS