IB Union Calendar No. 461 116TH CONGRESS 2D SESSION H. R. 3623 [Report No. 116–563, Part I] To amend the Securities Exchange Act of 1934 to require issuers to disclose certain activities relating to climate change, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JULY 5, 2019 Mr. CASTEN of Illinois (for himself and Mr. CARTWRIGHT) introduced the fol- lowing bill; which was referred to the Committee on Financial Services, and in addition to the Committee on Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consider- ation of such provisions as fall within the jurisdiction of the committee concerned OCTOBER 27, 2020 Additional sponsors: Mr. MCGOVERN, Ms. OCASIO-CORTEZ, Ms. VELA´ZQUEZ, Ms. DEAN, Mr. SAN NICOLAS, Ms. BROWNLEY of California, Mr. SOTO, Mr. LAWSON of Florida, Mr. NEGUSE, Mr. HUFFMAN, Ms. PRESSLEY, Mr. TONKO, Mr. FOSTER, Ms. BARRAGA´N, Mr. LOWENTHAL, Mr. GRI- JALVA, Mr. CISNEROS, Ms. WILD, Ms. JUDY CHU of California, Mr. LEVIN of California, Ms. BONAMICI, Ms. ESHOO, Mr. DESAULNIER, Mr. TED LIEU of California, Mr. CLEAVER, Mr. BLUMENAUER, Mr. ROUDA, Ms. LOFGREN, Ms. DEGETTE, Mrs. NAPOLITANO, Mr. KIND, Mr. GARCI´A of Illinois, Mr. GONZALEZ of Texas, and Ms. ESCOBAR OCTOBER 27, 2020 Reported from the Committee on Financial Services with an amendment [Strike out all after the enacting clause and insert the part printed in italic] VerDate Sep 11 2014 23:18 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6652 E:\BILLS\H3623.RH H3623 pbinns on DSKJLVW7X2PROD with BILLS 2 •HR 3623 RH OCTOBER 27, 2020 Committee on Energy and Commerce discharged; committed to the Committee of the Whole House on the State of the Union and ordered to be printed [For text of introduced bill, see copy of bill as introduced on July 5, 2019] A BILL To amend the Securities Exchange Act of 1934 to require issuers to disclose certain activities relating to climate change, and for other purposes. VerDate Sep 11 2014 23:18 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6652 E:\BILLS\H3623.RH H3623 pbinns on DSKJLVW7X2PROD with BILLS 3 •HR 3623 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 2019’’. 5 SEC. 2. DEFINITIONS. 6 In this Act— 7 (1) the term ‘‘1.5 degree scenario’’ means a wide- 8 ly recognized, publicly available analysis scenario in 9 which human interventions to combat global climate 10 change are likely to prevent the global average tem- 11 perature from reaching 1.5 degrees Celsius above pre- 12 industrial levels; 13 (2) the terms ‘‘appropriate climate principals’’, 14 ‘‘climate change’’, and ‘‘appropriate congressional 15 committees’’ have the meanings given those terms in 16 section 13(s) of the Securities Exchange Act of 1934; 17 (3) the term ‘‘baseline scenario’’ means a widely- 18 recognized analysis scenario in which levels of green- 19 house gas emissions, as of the date on which the anal- 20 ysis is performed, continue to grow, resulting in— 21 (A) an increase in the global average tem- 22 perature of 1.5 degrees Celsius or more above 23 pre-industrial levels; and 24 VerDate Sep 11 2014 23:18 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6203 E:\BILLS\H3623.RH H3623 pbinns on DSKJLVW7X2PROD with BILLS 4 •HR 3623 RH (B) the realization of physical risks relating 1 to global climate change; 2 (4) the term ‘‘carbon dioxide equivalent’’ means 3 the number of metric tons of carbon dioxide emissions 4 with the same global warming potential as one metric 5 ton of another greenhouse gas, as determined under 6 table A-1 of subpart A of part 98 of title 40, Code of 7 Federal Regulations, as in effect on the date of enact- 8 ment of this subsection; 9 (5) the term ‘‘Commission’’ means the Securities 10 and Exchange Commission; 11 (6) the term ‘‘commercial development of fossil 12 fuels’’ includes— 13 (A) exploration, extraction, processing, ex- 14 porting, transporting, and any other significant 15 action with respect to oil, natural gas, coal, or 16 any byproduct thereof; and 17 (B) acquiring a license for any activity de- 18 scribed in subparagraph (A); 19 (7) the term ‘‘covered issuer’’ has the meaning 20 given the term in section 13(s) of the Securities Ex- 21 change Act of 1934; 22 (8) the term ‘‘direct and indirect greenhouse gas 23 emissions’’ includes, with respect to a covered 24 issuer— 25 VerDate Sep 11 2014 23:18 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6203 E:\BILLS\H3623.RH H3623 pbinns on DSKJLVW7X2PROD with BILLS 5 •HR 3623 RH (A) all direct greenhouse gas emissions re- 1 leased by the covered issuer; 2 (B) all indirect greenhouse gas emissions 3 with respect to electricity, heat, or steam pur- 4 chased by the covered issuer; 5 (C) significant indirect emissions, other 6 than the emissions described in subparagraph 7 (B), that occur in the value chain of the covered 8 issuer; and 9 (D) all indirect greenhouse gas emissions 10 that are attributable to assets owned or man- 11 aged, including assets that are partially owned 12 or managed, by the covered issuer; 13 (9) the term ‘‘fossil fuel reserves’’ means all pro- 14 ducing assets, proved reserves, unproved resources, 15 and any other ownership stake in sources of fossil 16 fuels; 17 (10) the term ‘‘greenhouse gas’’— 18 (A) means carbon dioxide, 19 hydrofluorocarbons, methane, nitrous oxide, 20 perfluorocarbons, sulfur hexafluoride, nitrogen 21 triflouride, and chlorofluorocarbons; and 22 (B) includes any other anthropogenically- 23 emitted gas or particulate that the Adminis- 24 trator of the Environmental Protection Agency 25 VerDate Sep 11 2014 23:18 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6203 E:\BILLS\H3623.RH H3623 pbinns on DSKJLVW7X2PROD with BILLS 6 •HR 3623 RH determines, after notice and comment, to con- 1 tribute to climate change; 2 (11) the term ‘‘greenhouse gas emissions’’ means 3 the emissions of greenhouse gas, expressed in terms of 4 metric tons of carbon dioxide equivalent; 5 (12) the term ‘‘physical risks’’ has meaning 6 given the term in section 13(s) of the Securities Ex- 7 change Act of 1934; 8 (13) the term ‘‘social cost of carbon’’ means the 9 monetized present value, discounted at a 3 percent or 10 lower discount rate, in dollars, per metric ton of car- 11 bon dioxide (or carbon dioxide equivalent), of the net 12 global costs over 300 years caused by the emission of 13 carbon dioxide (or carbon dioxide equivalent, as ap- 14 plicable) that result from— 15 (A) changes in net agricultural produc- 16 tivity; 17 (B) decreases in capital and labor produc- 18 tivity; 19 (C) effects on human health; 20 (D) property damage from increased sea 21 level rise, flooding, wildfires, and frequency and 22 severity of extreme weather events; 23 (E) the value of ecosystem services; and 24 VerDate Sep 11 2014 23:18 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6203 E:\BILLS\H3623.RH H3623 pbinns on DSKJLVW7X2PROD with BILLS 7 •HR 3623 RH (F) any other type of economic, social, po- 1 litical, or natural disruption; 2 (14) the term ‘‘transition risks’’ has meaning 3 given the term in section 13(s) of the Securities Ex- 4 change Act of 1934. 5 (15) the term ‘‘value chain’’— 6 (A) means the total lifecycle of a product or 7 service, both before and after production of the 8 product or service, as applicable; and 9 (B) may include the sourcing of materials, 10 production, and disposal with respect to the 11 product or service described in subparagraph 12 (A); and 13 (16) the term ‘‘well below 1.5 degrees scenario’’ 14 means a widely-recognized, publicly-available anal- 15 ysis scenario in which human interventions to combat 16 global climate change are likely to prevent the global 17 average temperature from reaching 1.5 degrees Celsius 18 above pre-industrial levels. 19 SEC. 3. SENSE OF CONGRESS. 20 It is the sense of Congress that— 21 (1) climate change poses a significant and in- 22 creasing threat to the growth and stability of the 23 economy of the United States; 24 VerDate Sep 11 2014 23:18 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6203 E:\BILLS\H3623.RH H3623 pbinns on DSKJLVW7X2PROD with BILLS 8 •HR 3623 RH (2) many sectors of the economy of the United 1 States and many American businesses are exposed to 2 multiple channels of climate-related risk, which may 3 include exposure to— 4 (A) the physical impacts of climate change, 5 including the rise of the average global tempera- 6 ture, accelerating sea-level rise, desertification, 7 ocean acidification, intensification of storms, in- 8 crease in heavy precipitation, more frequent and 9 intense temperature extremes, more severe 10 droughts, and longer wildfire seasons; 11 (B) the economic disruptions and security 12 threats that result from the physical impacts de- 13 scribed in subparagraph (A) including conflicts 14 over scarce resources, conditions conducive to 15 violent extremism, the spread of infectious dis- 16 eases, and forced migration; and 17 (C) the transition impacts that result as the 18 global economy transitions to a clean and renew- 19 able energy, low-emissions economy, including fi- 20 nancial impacts as fossil fuel assets risk becom- 21 ing stranded and it becomes uneconomic for com- 22 panies to develop fossil fuel assets as policy- 23 makers act to limit the worst impacts of climate 24 change by keeping the rise in average global tem- 25 VerDate Sep 11 2014 23:18 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6203 E:\BILLS\H3623.RH H3623 pbinns on DSKJLVW7X2PROD with BILLS 9 •HR 3623 RH perature to 1.5 degrees Celsius above pre-indus- 1 trial levels; 2 (3) assessing the potential impact of climate-re- 3 lated risks on national and international financial 4 systems is an urgent concern; 5 (4) companies have a duty to disclose financial 6 risks that climate change presents to their investors, 7 lenders, and insurers; 8 (5) the Commission has a duty to promote a 9 risk-informed securities market that is worthy of the 10 trust of the public as families invest for their futures; 11 (6) investors, lenders, and insurers are increas- 12 ingly demanding climate risk information that is 13 consistent, comparable, reliable, and clear; 14 (7) including standardized, material climate 15 change risk and opportunity disclosure that is useful 16 for decision makers in annual reports to the Commis- 17 sion will increase transparency with respect to risk 18 accumulation and exposure in financial markets; 19 (8) requiring companies to disclose climate-re- 20 lated risk exposure and risk management strategies 21 will encourage a smoother transition to a clean and 22 renewable energy, low-emissions economy and guide 23 capital allocation to mitigate, and adapt to, the ef- 24 VerDate Sep 11 2014 23:18 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6203 E:\BILLS\H3623.RH H3623 pbinns on DSKJLVW7X2PROD with BILLS 10 •HR 3623 RH fects of climate change and limit damages associated 1 with climate-related events and disasters; and 2 (9) a critical component in fighting climate 3 change is a transparent accounting of the risks that 4 climate change presents and the implications of con- 5 tinued inaction with respect to climate change. 6 SEC. 4. FINDINGS. 7 Congress finds that— 8 (1) short-, medium-, and long-term financial 9 and economic risks and opportunities relating to cli- 10 mate change, and the national and global reduction 11 of greenhouse gas emissions, constitute information 12 that issuers— 13 (A) may reasonably expect to affect share- 14 holder decision making; and 15 (B) should regularly identify, evaluate, and 16 disclose; and 17 (2) the disclosure of information described in 18 paragraph (1) should— 19 (A) identify, and evaluate— 20 (i) material physical and transition 21 risks posed by climate change; and 22 (ii) the potential financial impact of 23 such risks; 24 VerDate Sep 11 2014 23:18 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6203 E:\BILLS\H3623.RH H3623 pbinns on DSKJLVW7X2PROD with BILLS 11 •HR 3623 RH (B) detail any implications such risks have 1 on corporate strategy; 2 (C) detail any board-level oversight of mate- 3 rial climate related risks and opportunities; 4 (D) allow for intra- and cross-industry 5 comparison, to the extent practicable, of climate- 6 related risk exposure through the inclusion of 7 standardized industry-specific and sector-specific 8 disclosure metrics, as identified by the Commis- 9 sion, in consultation with the appropriate cli- 10 mate principals; 11 (E) allow for tracking of performance over 12 time with respect to mitigating climate risk ex- 13 posure; and 14 (F) incorporate a price on greenhouse gas 15 emissions in financial analyses that reflects, at 16 minimum, the social cost of carbon that is at- 17 tributable to issuers. 18 SEC. 5. DISCLOSURES RELATING TO CLIMATE CHANGE. 19 Section 13 of the Securities Exchange Act of 1934 (15 20 U.S.C. 78m) is amended by adding at the end the following: 21 ‘‘(s) DISCLOSURES RELATING TO CLIMATE CHANGE.— 22 ‘‘(1) DEFINITIONS.—In this subsection— 23 ‘‘(A) the term ‘appropriate climate prin- 24 cipals’ means— 25 VerDate Sep 11 2014 23:18 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6203 E:\BILLS\H3623.RH H3623 pbinns on DSKJLVW7X2PROD with BILLS 12 •HR 3623 RH ‘‘(i) the Administrator of the Environ- 1 mental Protection Agency; 2 ‘‘(ii) the Secretary of Energy; 3 ‘‘(iii) the Administrator of the Na- 4 tional Oceanic and Atmospheric Adminis- 5 tration; 6 ‘‘(iv) the Director of the Office of Man- 7 agement and Budget; and 8 ‘‘(v) the head of any other Federal 9 agency determined appropriate by the Com- 10 mission; 11 ‘‘(B) the term ‘climate change’ means a 12 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 ‘‘(C) the term ‘covered issuer’ means an 20 issuer that is required to file an annual report 21 under subsection (a) or section 15(d); 22 ‘‘(D) the term ‘physical risks’ means finan- 23 cial risks to long-lived fixed assets, locations, op- 24 erations, or value chains that result from expo- 25 VerDate Sep 11 2014 23:18 Oct 29, 2020 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6203 E:\BILLS\H3623.RH H3623 pbinns on DSKJLVW7X2PROD with BILLS 13 •HR 3623 RH sure to physical climate-related effects, includ- 1 ing— 2 ‘‘(i) increased average global tempera- 3 tures and increased frequency of tempera- 4 ture extremes; 5 ‘‘(ii) increa [Text truncated for display. 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