Addressing Climate Financial Risk Act of 2020

II 116TH CONGRESS 2D SESSION S. 5041 To establish the Advisory Committee on Climate Risk on the Financial Stability Oversight Council. IN THE SENATE OF THE UNITED STATES DECEMBER 17, 2020 Mrs. FEINSTEIN (for herself and Ms. CORTEZ MASTO) 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 2020’’. 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 by inserting after section 121 (12 U.S.C. 5331) the fol- 9 lowing: 10 VerDate Sep 11 2014 21:54 Jan 04, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S5041.IS S5041 kjohnson on DSK79L0C42PROD with BILLS 2 •S 5041 IS ‘‘SEC. 121A. ADVISORY COMMITTEE ON CLIMATE RISK. 1 ‘‘(a) ESTABLISHMENT.—There is established in the 2 Council the Climate Risk Advisory Committee, which 3 shall— 4 ‘‘(1) consult with the Council in the drafting by 5 the Council of an annual report on climate risk re- 6 quired under subsection (e) and other climate risk 7 matters; and 8 ‘‘(2) meet with the Council not less frequently 9 than once per year. 10 ‘‘(b) MEMBERSHIP.— 11 ‘‘(1) IN GENERAL.—The Committee shall con- 12 sist of the following members: 13 ‘‘(A) Four members who are climate 14 science experts, of whom— 15 ‘‘(i) 1 shall be appointed by the Sec- 16 retary of Energy; 17 ‘‘(ii) 1 shall be appointed by the Ad- 18 ministrator of the Environmental Protec- 19 tion Agency; and 20 ‘‘(iii) 2 shall be appointed by the Di- 21 rector of the National Science Foundation. 22 ‘‘(B) Eight members who are experts in 23 climate economics or climate financial risk ap- 24 pointed by the Council, of whom not fewer than 25 1 member is each an expert in— 26 VerDate Sep 11 2014 21:54 Jan 04, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S5041.IS S5041 kjohnson on DSK79L0C42PROD with BILLS 3 •S 5041 IS ‘‘(i) insurance; 1 ‘‘(ii) capital markets; 2 ‘‘(iii) banking; 3 ‘‘(iv) international financial markets; 4 and 5 ‘‘(v) housing. 6 ‘‘(2) PROHIBITION.—No member of the Com- 7 mittee may be employed by a company within the ju- 8 risdiction of a member agency of the Council. 9 ‘‘(c) TERM.—The members of the Committee shall be 10 appointed for 3-year terms, except that the initial terms 11 of the first members of the Committee shall be staggered 12 so that— 13 ‘‘(1) 4 members serve terms of 3 years; 14 ‘‘(2) 4 members serve terms of 2 years; and 15 ‘‘(3) 4 members serve terms of 1 years. 16 ‘‘(d) CONSULTATION.—The Council shall consult 17 with the Committee in carrying out the requirements of 18 this section. 19 ‘‘(e) REPORT ON CLIMATE FINANCIAL RISK.—Not 20 later than 270 days after the date of enactment of this 21 section, the Council shall, in coordination with the Com- 22 mittee and the Deputies Committee of the Council, publish 23 a report that— 24 ‘‘(1) assesses— 25 VerDate Sep 11 2014 21:54 Jan 04, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S5041.IS S5041 kjohnson on DSK79L0C42PROD with BILLS 4 •S 5041 IS ‘‘(A) the potential impact of climate risk 1 on the financial stability of the United States; 2 ‘‘(B) the extent to which Federal and 3 State financial regulatory agencies have suffi- 4 cient expertise on climate risk; and 5 ‘‘(C) the quality of data available to Coun- 6 cil members to properly assess climate financial 7 risk and any gaps in data that exist; and 8 ‘‘(D) the extent to which supervised finan- 9 cial institutions are engaging in sound climate 10 risk management; and 11 ‘‘(E) the degree of coordination among 12 Federal and State financial regulatory agencies 13 on climate risk; and 14 ‘‘(F) the degree of coordination by Federal 15 and State financial regulatory agencies with 16 international financial regulatory authorities on 17 climate financial risk; and 18 ‘‘(G) how U.S. climate financial risk disclo- 19 sure requirements compare to climate financial 20 risk disclosure regimes in other countries and to 21 other regimes that are available; and 22 ‘‘(H) any other areas the Council believes 23 are important; and 24 VerDate Sep 11 2014 21:54 Jan 04, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S5041.IS S5041 kjohnson on DSK79L0C42PROD with BILLS 5 •S 5041 IS ‘‘(2) provides recommendations based on the as- 1 sessments in paragraph (1) to Federal and State fi- 2 nancial regulatory agencies and to Congress on how 3 to improve the ability of the financial regulatory sys- 4 tem in the United States to identify and mitigate cli- 5 mate financial risk. 6 ‘‘(f) MEMBER AGENCIES.—Each member agency 7 should develop and make publicly available a strategy to 8 identify and mitigate climate financial risk within the ju- 9 risdiction of the member agency. 10 ‘‘(g) COORDINATION.—The Council should— 11 ‘‘(1) facilitate the sharing of best practices on 12 climate financial risk across agencies; and 13 ‘‘(2) assign the Office of Financial Research to 14 conduct ongoing research into climate financial risk. 15 ‘‘(h) INCLUSION IN ANNUAL REPORT.—The Council 16 shall include a section on climate financial risk in— 17 ‘‘(1) the annual report of the Council to Con- 18 gress; and 19 ‘‘(2) if relevant, in any other report to Con- 20 gress.’’. 21 (b) TECHNICAL AND CONFORMING AMENDMENT.— 22 The table of contents of the Dodd-Frank Wall Street Re- 23 form and Consumer Protection Act in section 1(b) of that 24 VerDate Sep 11 2014 21:54 Jan 04, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S5041.IS S5041 kjohnson on DSK79L0C42PROD with BILLS 6 •S 5041 IS Act is amended by inserting after the item relating to sec- 1 tion 121 the following: 2 ‘‘Sec. 121A. Advisory Committee on Climate Risk.’’. SEC. 3. UPDATE ON SUPERVISORY GUIDANCE ON CLIMATE 3 RISK. 4 (a) DEFINITION.—In this section, the term ‘‘Federal 5 banking agency’’ has the meaning given the term in sec- 6 tion 2 of the Dodd-Frank Wall Street Reform and Con- 7 sumer Protection Act (12 U.S.C. 5301). 8 (b) UPDATE.—Each Federal banking agency and the 9 National Credit Union Administration shall update appli- 10 cable supervisory guidance to include climate risk, includ- 11 ing credit, liquidity, market, operational, and reputational 12 risk to ensure that supervised financial institutions appro- 13 priately identify and mitigate climate financial risk. 14 (c) COORDINATION.—The Federal Financial Institu- 15 tions Examination Council shall ensure that the guidance 16 updated under subsection (b) is— 17 (1) appropriately coordinated among the Fed- 18 eral banking agencies and the National Credit Union 19 Administration; and 20 (2) shared with State regulators. 21 SEC. 4. UPDATE NONBANK SIFI DESIGNATION GUIDANCE. 22 The Financial Stability Oversight Council shall up- 23 date subpart B of part 1310 of title 12, Code of Federal 24 VerDate Sep 11 2014 21:54 Jan 04, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S5041.IS S5041 kjohnson on DSK79L0C42PROD with BILLS 7 •S 5041 IS Regulations, to specify how the Council will incorporate 1 climate risk into determinations described in that subpart. 2 SEC. 5. FIO REPORT ON INSURANCE REGULATION AND CLI- 3 MATE RISK. 4 Not later than 1 year after the date of enactment 5 of this Act, the Federal Insurance Office shall publish a 6 report that— 7 (1) assesses the potential impact of climate fi- 8 nancial risk on the insurance sector in the United 9 States; and 10 (2) recommends ways to modernize and improve 11 the system of climate risk insurance regulation in 12 the United States. 13 SEC. 6. IMPROVE GLOBAL COORDINATION. 14 It is the sense of Congress that relevant Federal fi- 15 nancial regulatory agencies and the Department of the 16 Treasury, if relevant, should— 17 (1) join the Network for Greening the Financial 18 System and other international organizations fo- 19 cused on climate financial risk; 20 (2) formally join the Task Force on Climate- 21 Related Financial Risks of the Basel Committee on 22 Banking Supervision; and 23 VerDate Sep 11 2014 21:54 Jan 04, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S5041.IS S5041 kjohnson on DSK79L0C42PROD with BILLS 8 •S 5041 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 21:54 Jan 04, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6301 E:\BILLS\S5041.IS S5041 kjohnson on DSK79L0C42PROD with BILLS