II 116TH CONGRESS 1ST SESSION S. 2075 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 SENATE OF THE UNITED STATES JULY 10, 2019 Ms. WARREN (for herself, Mr. SCHATZ, Mr. WHITEHOUSE, Mr. VAN HOLLEN, Ms. KLOBUCHAR, Mrs. GILLIBRAND, Mr. BENNET, Mr. BLUMENTHAL, Mr. BOOKER, Mr. MARKEY, Mr. MERKLEY, Ms. HARRIS, Ms. SMITH, Mrs. FEINSTEIN, Mr. SCHUMER, and Mr. CARPER) introduced the fol- lowing bill; which was read twice and referred to the Committee on Bank- ing, Housing, and Urban Affairs 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. 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 Disclo- 4 sure Act of 2019’’. 5 SEC. 2. DEFINITIONS. 6 In this Act— 7 VerDate Sep 11 2014 00:40 Jul 12, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2075.IS S2075 pamtmann on DSKBFK8HB2PROD with BILLS 2 •S 2075 IS (1) the terms ‘‘appropriate climate principals’’, 1 ‘‘climate change’’, ‘‘covered issuer’’, ‘‘physical risks’’, 2 and ‘‘transition risks’’ have the meanings given 3 those terms in subsection (s) of section 13 of the Se- 4 curities Exchange Act of 1934 (15 U.S.C. 78m), as 5 added by section 5; 6 (2) the term ‘‘appropriate congressional com- 7 mittees’’ means— 8 (A) the Committee on Banking, Housing, 9 and Urban Affairs of the Senate; and 10 (B) the Committee on Financial Services 11 of the House of Representatives; 12 (3) the term ‘‘baseline scenario’’ means a widely 13 recognized analysis scenario in which levels of green- 14 house gas emissions, as of the date on which the 15 analysis is performed, continue to grow, resulting 16 in— 17 (A) an increase in the global average tem- 18 perature of 1.5 degrees Celsius or more above 19 pre-industrial levels; and 20 (B) the realization of physical risks relat- 21 ing to global climate change; 22 (4) the term ‘‘carbon dioxide equivalent’’ means 23 the number of metric tons of carbon dioxide emis- 24 sions with the same global warming potential as 1 25 VerDate Sep 11 2014 00:40 Jul 12, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2075.IS S2075 pamtmann on DSKBFK8HB2PROD with BILLS 3 •S 2075 IS metric ton of another greenhouse gas, as determined 1 under table A–1 of subpart A of part 98 of title 40, 2 Code of Federal Regulations, as in effect on the date 3 of enactment of this Act; 4 (5) the term ‘‘commercial development of fossil 5 fuels’’ includes— 6 (A) exploration, extraction, processing, ex- 7 porting, transporting, and any other significant 8 action with respect to oil, natural gas, coal, or 9 any byproduct thereof; and 10 (B) acquiring a license for any activity de- 11 scribed in subparagraph (A); 12 (6) the term ‘‘Commission’’ means the Securi- 13 ties and Exchange Commission; 14 (7) the term ‘‘direct and indirect greenhouse 15 gas emissions’’ includes, with respect to a covered 16 issuer— 17 (A) all direct greenhouse gas emissions re- 18 leased by the covered issuer; 19 (B) all indirect greenhouse gas emissions 20 with respect to electricity, heat, or steam pur- 21 chased by the covered issuer; 22 (C) significant indirect emissions, other 23 than the emissions described in subparagraph 24 VerDate Sep 11 2014 00:40 Jul 12, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2075.IS S2075 pamtmann on DSKBFK8HB2PROD with BILLS 4 •S 2075 IS (B), that occur in the value chain of the covered 1 issuer; and 2 (D) all indirect greenhouse gas emissions 3 that are attributable to assets owned or man- 4 aged, including assets that are partially owned 5 or managed, by the covered issuer; 6 (8) the term ‘‘fossil fuel reserves’’ means all 7 producing assets, proved reserves, unproved re- 8 sources, and any other ownership stake in sources of 9 fossil fuels; 10 (9) the term ‘‘greenhouse gas’’— 11 (A) means carbon dioxide, hydrofluorocar- 12 bons, methane, nitrous oxide, perfluorocarbons, 13 sulfur hexafluoride, nitrogen triflouride, and 14 chlorofluorocarbons; and 15 (B) includes any other anthropogenically 16 emitted gas or particulate that the Adminis- 17 trator of the Environmental Protection Agency 18 determines, after notice and comment, to con- 19 tribute to climate change; 20 (10) the term ‘‘greenhouse gas emissions’’ 21 means the emissions of greenhouse gas, expressed in 22 terms of metric tons of carbon dioxide equivalent; 23 (11) the term ‘‘social cost of carbon’’ means the 24 monetized present value, discounted at a 3 percent 25 VerDate Sep 11 2014 00:40 Jul 12, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2075.IS S2075 pamtmann on DSKBFK8HB2PROD with BILLS 5 •S 2075 IS or lower discount rate, in dollars, per metric ton of 1 carbon dioxide (or carbon dioxide equivalent), of the 2 net global costs over 300 years caused by the emis- 3 sion of carbon dioxide (or carbon dioxide equivalent, 4 as applicable) that result from— 5 (A) changes in net agricultural produc- 6 tivity; 7 (B) decreases in capital and labor produc- 8 tivity; 9 (C) effects on human health; 10 (D) property damage from increased sea- 11 level rise, flooding, wildfires, and frequency and 12 severity of extreme weather events; 13 (E) the value of ecosystem services; and 14 (F) any other type of economic, social, po- 15 litical, or natural disruption; 16 (12) the term ‘‘value chain’’— 17 (A) means the total lifecycle of a product 18 or service, both before and after production of 19 the product or service, as applicable; and 20 (B) may include the sourcing of materials, 21 production, and disposal with respect to the 22 product or service described in subparagraph 23 (A); 24 VerDate Sep 11 2014 00:40 Jul 12, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2075.IS S2075 pamtmann on DSKBFK8HB2PROD with BILLS 6 •S 2075 IS (13) the term ‘‘well below 1.5 degrees scenario’’ 1 means a widely recognized, publicly available anal- 2 ysis scenario in which human interventions to com- 3 bat global climate change are likely to prevent the 4 global average temperature from reaching 1.5 de- 5 grees Celsius above pre-industrial levels; and 6 (14) the term ‘‘1.5 degree scenario’’ means a 7 widely recognized, publicly available analysis sce- 8 nario in which human interventions to combat global 9 climate change are likely to prevent the global aver- 10 age temperature from reaching 1.5 degrees Celsius 11 above pre-industrial levels. 12 SEC. 3. SENSE OF CONGRESS. 13 It is the sense of Congress that— 14 (1) climate change poses a significant and in- 15 creasing threat to the growth and stability of the 16 economy of the United States; 17 (2) many sectors of the economy of the United 18 States and many businesses in the United States are 19 exposed to multiple channels of climate-related risk, 20 which may include exposure to— 21 (A) the physical impacts of climate change, 22 including the rise of the average global tem- 23 perature, accelerating sea-level rise, desertifica- 24 tion, ocean acidification, intensification of 25 VerDate Sep 11 2014 00:40 Jul 12, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2075.IS S2075 pamtmann on DSKBFK8HB2PROD with BILLS 7 •S 2075 IS storms, increase in heavy precipitation, more 1 frequent and intense temperature extremes, 2 more severe droughts, and longer wildfire sea- 3 sons; 4 (B) the economic disruptions and security 5 threats that result from the physical impacts 6 described in subparagraph (A), including con- 7 flicts over scarce resources, conditions condu- 8 cive to violent extremism, the spread of infec- 9 tious diseases, and forced migration; and 10 (C) the transition impacts that result as 11 the global economy transitions to a clean and 12 renewable energy, low-emissions economy, in- 13 cluding financial impacts as fossil fuel assets 14 risk becoming stranded and it becomes uneco- 15 nomic for companies to develop fossil fuel assets 16 as policymakers act to limit the worst impacts 17 of climate change by keeping the rise in average 18 global temperature to 1.5 degrees Celsius above 19 pre-industrial levels; 20 (3) assessing the potential impact of climate-re- 21 lated risks on national and international financial 22 systems is an urgent concern; 23 VerDate Sep 11 2014 00:40 Jul 12, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2075.IS S2075 pamtmann on DSKBFK8HB2PROD with BILLS 8 •S 2075 IS (4) companies have a duty to disclose financial 1 risks that climate change presents to their investors, 2 lenders, and insurers; 3 (5) the Commission has a duty to promote a 4 risk-informed securities market that is worthy of the 5 trust of the public as families invest for their fu- 6 tures; 7 (6) investors, lenders, and insurers are increas- 8 ingly demanding climate risk information that is 9 consistent, comparable, reliable, and clear; 10 (7) including standardized, material climate 11 change risk and opportunity disclosure that is useful 12 for decision makers in annual reports to the Com- 13 mission will increase transparency with respect to 14 risk accumulation and exposure in financial markets; 15 (8) requiring companies to disclose climate-re- 16 lated risk exposure and risk management strategies 17 will encourage a smoother transition to a clean and 18 renewable energy, low-emissions economy and guide 19 capital allocation to mitigate, and adapt to, the ef- 20 fects of climate change and limit damages associated 21 with climate-related events and disasters; and 22 (9) a critical component in fighting climate 23 change is a transparent accounting of the risks that 24 VerDate Sep 11 2014 00:40 Jul 12, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2075.IS S2075 pamtmann on DSKBFK8HB2PROD with BILLS 9 •S 2075 IS climate change presents and the implications of con- 1 tinued inaction with respect to climate change. 2 SEC. 4. FINDINGS. 3 Congress finds that— 4 (1) short-, medium-, and long-term financial 5 and economic risks and opportunities relating to cli- 6 mate change, and the national and global reduction 7 of greenhouse gas emissions, constitute information 8 that issuers— 9 (A) may reasonably expect to affect share- 10 holder decision making; and 11 (B) should regularly identify, evaluate, and 12 disclose; and 13 (2) the disclosure of information described in 14 paragraph (1) should— 15 (A) identify, and evaluate— 16 (i) material physical and transition 17 risks posed by climate change; and 18 (ii) the potential financial impact of 19 risks described in clause (i); 20 (B) detail any implications that the risks 21 described in subparagraph (A)(i) have on cor- 22 porate strategy; 23 (C) detail any board-level oversight of ma- 24 terial climate-related risks and opportunities; 25 VerDate Sep 11 2014 00:40 Jul 12, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2075.IS S2075 pamtmann on DSKBFK8HB2PROD with BILLS 10 •S 2075 IS (D) allow for intra- and cross-industry 1 comparison, to the extent practicable, of cli- 2 mate-related risk exposure through the inclu- 3 sion of standardized industry-specific and sec- 4 tor-specific disclosure metrics, as identified by 5 the Commission, in consultation with the appro- 6 priate climate principals; 7 (E) allow for tracking of performance over 8 time with respect to mitigating climate risk ex- 9 posure; and 10 (F) incorporate a price on greenhouse gas 11 emissions in financial analyses that reflects, at 12 minimum, the social cost of carbon that is at- 13 tributable to issuers. 14 SEC. 5. DISCLOSURES RELATING TO CLIMATE CHANGE. 15 (a) IN GENERAL.—Section 13 of the Securities Ex- 16 change Act of 1934 (15 U.S.C. 78m) is amended by add- 17 ing at the end the following: 18 ‘‘(s) DISCLOSURES RELATING TO CLIMATE 19 CHANGE.— 20 ‘‘(1) DEFINITIONS.—In this subsection— 21 ‘‘(A) the term ‘appropriate climate prin- 22 cipals’ means— 23 ‘‘(i) the Administrator of the Environ- 24 mental Protection Agency; 25 VerDate Sep 11 2014 00:40 Jul 12, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2075.IS S2075 pamtmann on DSKBFK8HB2PROD with BILLS 11 •S 2075 IS ‘‘(ii) the Secretary of Energy; 1 ‘‘(iii) the Administrator of the Na- 2 tional Oceanic and Atmospheric Adminis- 3 tration; 4 ‘‘(iv) the Director of the Office of 5 Management and Budget; and 6 ‘‘(v) the head of any other Federal 7 agency determined appropriate by the 8 Commission; 9 ‘‘(B) the term ‘climate change’ means a 10 change of climate that is— 11 ‘‘(i) attributed directly or indirectly to 12 human activity that alters the composition 13 of the global atmosphere; and 14 ‘‘(ii) in addition to natural climate 15 variability observed over comparable time 16 periods; 17 ‘‘(C) the term ‘covered issuer’ means an 18 issuer that is required to file an annual report 19 under subsection (a) or section 15(d); 20 ‘‘(D) the term ‘physical risks’ means finan- 21 cial risks to long-lived fixed assets, locations, 22 operations, or value chains that result from ex- 23 posure to physical climate-related effects, in- 24 cluding— 25 VerDate Sep 11 2014 00:40 Jul 12, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S2075.IS S2075 pamtmann on DSKBFK8HB2PROD with BILLS 12 •S 2075 IS ‘‘(i) increased average global tempera- 1 tures and increased frequency of tempera- 2 ture extremes; 3 ‘‘(ii) increased severity and frequency 4 of extreme weather events; 5 ‘‘(iii) increased flooding; 6 ‘‘(iv) sea-level rise; 7 ‘‘(v) ocean acidification; 8 ‘‘(vi) increased frequency of wildfires; 9 ‘‘(vii) decreased arability of farmland; 10 ‘‘(viii) decreased availability of fresh 11 water; and 12 ‘‘(ix) any other financial risks to long- 13 lived fixed assets, locations, operations, or 14 value chains determined appropriate by the 15 Commission, in consultation with appro- 16 priate climate principals; 17 ‘‘(E) the term ‘transition risks’ means fi- 18 nancial risks that are attributable to climate 19 change mitigation and adaptation, including ef- 20 forts to reduce greenhouse gas emissions and 21 strengthen resilience to the impacts of climate 22 change, including— 23 ‘‘(i) costs relating to— 24 VerDate Sep 11 2014 00:40 Jul 12, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S2075.IS S2075 pamtmann on DSKBFK8HB2PROD with BILLS 13 •S 2075 IS ‘‘(I) international treaties and 1 agreements; 2 ‘‘(II) Federal, State, and local 3 policy; 4 ‘‘(III) new technologies; 5 ‘‘(IV) changing markets; 6 ‘‘(V) reputational impacts rel- 7 evant to changing consumer behavior; 8 and 9 ‘ [Text truncated for display. 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