IB Union Calendar No. 22 117TH CONGRESS 1ST SESSION H. R. 2570 [Report No. 117–39] To amend the Securities Exchange Act of 1934 to require certain disclosures relating to climate change, and for other purposes. IN THE HOUSE OF REPRESENTATIVES APRIL 15, 2021 Mr. CASTEN (for himself, Mr. CARTWRIGHT, Mr. FOSTER, Mr. LOWENTHAL, Ms. BARRAGA´N, Mr. NEGUSE, and Mr. LEVIN of California) introduced the following bill; which was referred to the Committee on Financial Serv- ices MAY 20, 2021 Additional sponsors: Ms. BROWNLEY, Ms. VELA´ZQUEZ, Mr. PHILLIPS, Mr. SHERMAN, Mr. GRIJALVA, Mr. GARCI´A of Illinois, Ms. PRESSLEY, and Mr. HUFFMAN MAY 20, 2021 Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed [Strike out all after the enacting clause and insert the part printed in italic] [For text of introduced bill, see copy of bill as introduced on April 15, 2021] VerDate Sep 11 2014 20:03 May 20, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6652 E:\BILLS\H2570.RH H2570 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 2570 RH A BILL To amend the Securities Exchange Act of 1934 to require certain disclosures relating to climate change, and for other purposes. VerDate Sep 11 2014 20:03 May 20, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6652 E:\BILLS\H2570.RH H2570 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 2570 RH 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 ‘‘Climate Risk Disclosure 4 Act of 2021’’. 5 SEC. 2. SENSE OF CONGRESS. 6 It is the sense of Congress that— 7 (1) climate change poses a significant and in- 8 creasing threat to the growth and stability of the 9 economy of the United States; 10 (2) many sectors of the economy of the United 11 States and many American businesses are exposed to 12 climate-related risk, which may include exposure to— 13 (A) the physical impacts of climate change, 14 including the rise of the average global tempera- 15 ture, accelerating sea-level rise, desertification, 16 ocean acidification, intensification of storms, in- 17 crease in heavy precipitation, more frequent and 18 intense temperature extremes, more severe 19 droughts, and longer wildfire seasons; 20 (B) the economic disruptions and security 21 threats that result from the physical impacts de- 22 scribed in subparagraph (A) including conflicts 23 over scarce resources, conditions conducive to 24 VerDate Sep 11 2014 20:03 May 20, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6203 E:\BILLS\H2570.RH H2570 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 2570 RH violent extremism, the spread of infectious dis- 1 eases, and forced migration; 2 (C) the transition impacts that result as the 3 global economy transitions to a clean and renew- 4 able energy, low-emissions economy, including fi- 5 nancial impacts as climate change fossil fuel as- 6 sets becoming stranded and it becomes uneco- 7 nomic for companies to develop fossil fuel assets 8 as policymakers act to limit the worst impacts of 9 climate change by keeping the rise in average 10 global temperature to 1.5 degrees Celsius above 11 pre-industrial levels; and 12 (D) actions by Federal, State, Tribal, terri- 13 torial, and local governments to limit the worst 14 effects of climate change by enacting policies that 15 keep the global average surface temperature rise 16 to 1.5 degrees Celsius above pre-industrial levels; 17 (3) assessing the potential impact of climate-re- 18 lated risks on national and international financial 19 systems is an urgent concern; 20 (4) companies have a duty to disclose financial 21 risks that climate change presents to their investors, 22 lenders, and insurers; 23 (5) the Securities and Exchange Commission has 24 a duty to promote a risk-informed securities market 25 VerDate Sep 11 2014 20:03 May 20, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6203 E:\BILLS\H2570.RH H2570 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 2570 RH that is worthy of the trust of the public as families 1 invest for their futures; 2 (6) investors, lenders, and insurers are increas- 3 ingly demanding climate risk information that is 4 consistent, comparable, reliable, and clear; 5 (7) including standardized, material climate 6 change risk and opportunity disclosure that is useful 7 for decision makers in annual reports to the Commis- 8 sion will increase transparency with respect to risk 9 accumulation and exposure in financial markets; 10 (8) requiring companies to disclose climate-re- 11 lated risk exposure and risk management strategies 12 will encourage a smoother transition to a clean and 13 renewable energy, low-emissions economy and guide 14 capital allocation to mitigate, and adapt to, the ef- 15 fects of climate change and limit damages associated 16 with climate-related events and disasters; and 17 (9) a critical component in fighting climate 18 change is a transparent accounting of the risks that 19 climate change presents and the implications of con- 20 tinued inaction with respect to climate change. 21 SEC. 3. DISCLOSURES RELATING TO CLIMATE CHANGE. 22 Section 13 of the Securities Exchange Act of 1934 (15 23 U.S.C. 78m) is amended by adding at the end the following: 24 ‘‘(s) DISCLOSURES RELATING TO CLIMATE CHANGE.— 25 VerDate Sep 11 2014 20:03 May 20, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6203 E:\BILLS\H2570.RH H2570 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 2570 RH ‘‘(1) DEFINITIONS.—In this subsection: 1 ‘‘(A) 1.5 DEGREE SCENARIO.—The term ‘1.5 2 degree scenario’ means a scenario that aligns 3 with greenhouse gas emissions pathways that 4 aim to limit global warming to 1.5 degrees Cel- 5 sius above pre-industrial levels. 6 ‘‘(B) APPROPRIATE CLIMATE PRINCIPALS.— 7 The term ‘appropriate climate principals’ 8 means— 9 ‘‘(i) the Administrator of the Environ- 10 mental Protection Agency; 11 ‘‘(ii) the Administrator of the National 12 Oceanic and Atmospheric Administration; 13 ‘‘(iii) the Director of the Office of Man- 14 agement and Budget; 15 ‘‘(iv) the Secretary of the Interior; 16 ‘‘(v) the Secretary of Energy; and 17 ‘‘(vi) the head of any other Federal 18 agency, as determined appropriate by the 19 Commission. 20 ‘‘(C) BASELINE SCENARIO.—The term ‘base- 21 line scenario’ means a widely-recognized anal- 22 ysis scenario in which levels of greenhouse gas 23 emissions, as of the date on which the analysis 24 is performed, continue to grow, resulting in an 25 VerDate Sep 11 2014 20:03 May 20, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6203 E:\BILLS\H2570.RH H2570 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 2570 RH increase in the global average temperature of 1.5 1 degrees Celsius or more above pre-industrial lev- 2 els. 3 ‘‘(D) CARBON DIOXIDE EQUIVALENT.—The 4 term ‘carbon dioxide equivalent’ means the num- 5 ber of metric tons of carbon dioxide emissions 6 with the same global warming potential as one 7 metric ton of another greenhouse gas, as deter- 8 mined under table A–1 of subpart A of part 98 9 of title 40, Code of Federal Regulations, as in ef- 10 fect on the date of enactment of this subsection. 11 ‘‘(E) CLIMATE CHANGE.—The term ‘climate 12 change’ means a change of climate that is— 13 ‘‘(i) attributed directly or indirectly to 14 human activity that alters the composition 15 of the global atmosphere; and 16 ‘‘(ii) in addition to natural climate 17 variability observed over comparable time 18 periods. 19 ‘‘(F) COMMERCIAL DEVELOPMENT OF FOS- 20 SIL FUELS.—The term ‘commercial development 21 of fossil fuels’ includes— 22 ‘‘(i) exploration, extraction, processing, 23 exporting, transporting, refining, and any 24 other significant action with respect to oil, 25 VerDate Sep 11 2014 20:03 May 20, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6203 E:\BILLS\H2570.RH H2570 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 2570 RH natural gas, coal, or any byproduct thereof 1 or any other solid or liquid hydrocarbons 2 that are commercially produced; and 3 ‘‘(ii) acquiring a license for any activ- 4 ity described in clause (i). 5 ‘‘(G) COVERED ISSUER.—The term ‘covered 6 issuer’ means an issuer that is required to file 7 an annual report under subsection (a) or section 8 15(d). 9 ‘‘(H) DIRECT AND INDIRECT GREENHOUSE 10 GAS EMISSIONS.—The term ‘direct and indirect 11 greenhouse gas emissions’ includes, with respect 12 to a covered issuer— 13 ‘‘(i) all direct greenhouse gas emissions 14 released by the covered issuer; 15 ‘‘(ii) all indirect greenhouse gas emis- 16 sions with respect to electricity, heat, or 17 steam purchased by the covered issuer; 18 ‘‘(iii) significant indirect emissions, 19 other than the emissions described in clause 20 (ii), emitted in the value chain of the cov- 21 ered issuer; and 22 ‘‘(iv) all indirect greenhouse gas emis- 23 sions that are attributable to assets owned 24 or managed, including assets that are par- 25 VerDate Sep 11 2014 20:03 May 20, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6203 E:\BILLS\H2570.RH H2570 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 2570 RH tially owned or managed, by the covered 1 issuer. 2 ‘‘(I) FOSSIL FUEL RESERVES.—The term 3 ‘fossil fuel reserves’ has the meaning given the 4 term ‘reserves’ under the final rule of the Com- 5 mission titled ‘Modernization of Oil and Gas Re- 6 porting’ (74 Fed. Reg. 2158; published January 7 14, 2009). 8 ‘‘(J) GREENHOUSE GAS.—The term ‘green- 9 house gas’— 10 ‘‘(i) means carbon dioxide, 11 hydrofluorocarbons, methane, nitrous oxide, 12 perfluorocarbons, sulfur hexafluoride, nitro- 13 gen triflouride, and chlorofluorocarbons; 14 ‘‘(ii) includes any other 15 anthropogenically-emitted gas that the Ad- 16 ministrator of the Environmental Protec- 17 tion Agency determines, after notice and 18 comment, to contribute to climate change; 19 and 20 ‘‘(iii) includes any other 21 anthropogenically-emitted gas that the 22 Intergovernmental Panel on Climate 23 Change determines to contribute to climate 24 change. 25 VerDate Sep 11 2014 20:03 May 20, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6203 E:\BILLS\H2570.RH H2570 pamtmann on DSKBC07HB2PROD with BILLS 10 •HR 2570 RH ‘‘(K) GREENHOUSE GAS EMISSIONS.—The 1 term ‘greenhouse gas emissions’ means the emis- 2 sions of greenhouse gas, expressed in terms of 3 metric tons of carbon dioxide equivalent. 4 ‘‘(L) PHYSICAL RISKS.—The term ‘physical 5 risks’ means financial risks to long-lived fixed 6 assets, locations, operations, or value chains that 7 result from exposure to physical climate-related 8 effects, including— 9 ‘‘(i) increased average global tempera- 10 tures and increased frequency of tempera- 11 ture extremes; 12 ‘‘(ii) increased severity and frequency 13 of extreme weather events; 14 ‘‘(iii) increased flooding; 15 ‘‘(iv) sea level rise; 16 ‘‘(v) ocean acidification; 17 ‘‘(vi) increased frequency of wildfires; 18 ‘‘(vii) decreased arability of farmland; 19 ‘‘(viii) decreased availability of fresh 20 water; and 21 ‘‘(ix) any other financial risks to long- 22 lived fixed assets, locations, operations, or 23 value chains determined appropriate by the 24 VerDate Sep 11 2014 20:03 May 20, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6203 E:\BILLS\H2570.RH H2570 pamtmann on DSKBC07HB2PROD with BILLS 11 •HR 2570 RH Commission, in consultation with appro- 1 priate climate principals. 2 ‘‘(M) SOCIAL COST OF CARBON.—The term 3 ‘social cost of carbon’ means the social cost of 4 carbon, as described in the technical support doc- 5 ument entitled ‘Technical Support Document: 6 Technical Update of the Social Cost of Carbon 7 for Regulatory Impact Analysis Under Executive 8 Order 12866’, published by the Interagency 9 Working Group on Social Cost of Greenhouse 10 Gases, United States Government, in August 11 2016 or any successor or substantially related es- 12 timate of the monetized damages associated with 13 an incremental increase in carbon dioxide emis- 14 sions in a given year. 15 ‘‘(N) TRANSITION RISKS.—The term ‘transi- 16 tion risks’ means financial risks that are attrib- 17 utable to climate change mitigation and adapta- 18 tion, including efforts to reduce greenhouse gas 19 emissions and strengthen resilience to the im- 20 pacts of climate change, including— 21 ‘‘(i) costs relating to— 22 ‘‘(I) international treaties and 23 agreements; 24 VerDate Sep 11 2014 20:03 May 20, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6203 E:\BILLS\H2570.RH H2570 pamtmann on DSKBC07HB2PROD with BILLS 12 •HR 2570 RH ‘‘(II) Federal, State, and local 1 policy; 2 ‘‘(III) new technologies; 3 ‘‘(IV) changing markets; 4 ‘‘(V) reputational impacts rel- 5 evant to changing consumer behavior; 6 and 7 ‘‘(VI) litigation; and 8 ‘‘(ii) assets that may lose value or be- 9 come stranded due to any of the costs de- 10 scribed in subclauses (I) through (VI) of 11 clause (i). 12 ‘‘(O) VALUE CHAIN.—The term ‘value 13 chain’— 14 ‘‘(i) means the total lifecycle of a prod- 15 uct or service, both before and after produc- 16 tion of the product or service, as applicable; 17 and 18 ‘‘(ii) may include the sourcing of mate- 19 rials, production, transportation, and dis- 20 posal with respect to the product or service 21 described in clause (i). 22 ‘‘(2) FINDINGS.—Congress finds that— 23 ‘‘(A) short-, medium-, and long-term finan- 24 cial and economic risks and opportunities relat- 25 VerDate Sep 11 2014 20:03 May 20, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6203 E:\BILLS\H2570.RH H2570 pamtmann on DSKBC07HB2PROD with BILLS 13 •HR 2570 RH ing to climate change, and the national and 1 global reduction of greenhouse gas emissions, 2 constitute information that issuers— 3 ‘‘(i) may reasonably expect to affect 4 shareholder decision making; and 5 ‘‘(ii) should regularly identify, evalu- 6 ate, and disclose; and 7 ‘‘(B) the disclosure of information described 8 in subparagraph (A) should— 9 ‘‘(i) identify, and evaluate— 10 ‘‘(I) material physical and transi- 11 tion risks posed by climate change; and 12 ‘‘(II) the potential financial im- 13 pact of such risks; 14 ‘‘(ii) detail any implications such risks 15 have on corporate strategy; 16 ‘‘(iii) detail any board-level oversight 17 of material climate related risks and oppor- 18 tunities; 19 ‘‘(iv) allow for intra- and cross-indus- 20 try comparison, to the extent practicable, of 21 climate-related risk exposure through the in- 22 clusion of standardized industry-specific 23 and sector-specific disclosure metrics, as 24 identified by the Commission, in consulta- 25 VerDate Sep 11 2014 20:03 May 20, 2021 Jkt 019200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6203 E:\BILLS\H2570.RH H2570 pamtmann on DSKBC07HB2PROD with BILLS 14 •HR 25 [Text truncated for display. 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