Climate Protection and Sustainable Communities Act

I 116TH CONGRESS 2D SESSION H. R. 9059 To require Federal financial supervisory agencies to evaluate a financial institution’s record of meeting community environmentally sustainable investment needs as part of examinations, and for other purposes. IN THE HOUSE OF REPRESENTATIVES DECEMBER 31, 2020 Mr. KENNEDY (for himself and Mr. CICILLINE) introduced the following bill; which was referred to the Committee on Financial Services A BILL To require Federal financial supervisory agencies to evaluate a financial institution’s record of meeting community environmentally sustainable investment needs as part of examinations, 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 Protection and 4 Sustainable Communities Act’’. 5 SEC. 2. CONGRESSIONAL FINDINGS AND STATEMENT OF 6 PURPOSE. 7 (a) FINDINGS.—Congress finds the following: 8 VerDate Sep 11 2014 04:36 Jan 21, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H9059.IH H9059 pbinns on DSKJLVW7X2PROD with BILLS 2 •HR 9059 IH (1) Financial institutions that are federally reg- 1 ulated and supervised have an obligation to serve the 2 convenience and needs of the entire community, con- 3 sistent with safe and sound operations. These insti- 4 tutions include, but are not limited to, insured de- 5 pository institutions (and their holding companies, if 6 any), investment advisers, broker dealers, insurers, 7 non-bank lenders, credit unions, investment compa- 8 nies, and other financial institutions of significant 9 size and operations. 10 (2) The convenience and needs of communities 11 include the need for environmentally sustainable in- 12 vestment because— 13 (A) these financial institutions have, as a 14 result of their investment, lending, and other 15 activities, contributed to climate change and its 16 effects, and therefore have a responsibility to 17 act to mitigate climate change; and 18 (B) these financial institutions receive 19 Federal benefits not available to other types of 20 businesses, including— 21 (i) support for United States Treas- 22 ury bond markets, including extraordinary 23 commitments to purchase such bonds since 24 the onset of the COVID-19 health crisis; 25 VerDate Sep 11 2014 04:36 Jan 21, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H9059.IH H9059 pbinns on DSKJLVW7X2PROD with BILLS 3 •HR 9059 IH (ii) access to the Federal Reserve Dis- 1 count Window and other special lending fa- 2 cilities established by the Board of Gov- 3 ernors of the Federal Reserve System and 4 supported by the Treasury department; 5 (iii) measures to maintain efficient, 6 transparent, and competitive markets; 7 (iv) regulatory relief during times of 8 stress in the financial system, such as the 9 ongoing COVID-19 health crisis; and 10 (v) other actions to ensure financial 11 stability and mitigate risk to the financial 12 system as a whole. 13 (3) Regulated financial institutions have con- 14 tinuing and affirmative obligation to help meet the 15 environmentally sustainable investment needs of the 16 local communities in which they are chartered. 17 (4) Regulated financial institutions should re- 18 flect the communities which they serve, which in- 19 cludes people of color and women. 20 (b) PURPOSE.—It is the purpose of this Act to re- 21 quire covered financial institutions that are regulated and 22 supervised by one or more appropriate financial regulators 23 to meet the environmentally sustainable investment needs 24 VerDate Sep 11 2014 04:36 Jan 21, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H9059.IH H9059 pbinns on DSKJLVW7X2PROD with BILLS 4 •HR 9059 IH of the entire community, consistent with the safe and 1 sound operation of such institutions. 2 SEC. 3. DEFINITIONS. 3 (a) IN GENERAL.—In this Act: 4 (1) APPLICATION FOR A DEPOSIT FACILITY.— 5 The term ‘‘application for a deposit facility’’ means 6 an application to the appropriate financial regulator 7 otherwise required under Federal law or regulations 8 thereunder for— 9 (A) a charter for a national bank or Fed- 10 eral savings and loan association; 11 (B) deposit insurance in connection with a 12 newly chartered State bank, savings bank, sav- 13 ings and loan association or similar institution; 14 (C) the establishment of a domestic branch 15 or other facility with the ability to accept depos- 16 its of a regulated financial institution; 17 (D) the relocation of the home office or a 18 branch office of an insured depository institu- 19 tion (as defined in section 3 of the Federal De- 20 posit Insurance Act); 21 (E) the merger or consolidation with, or 22 the acquisition of the assets, or the assumption 23 of the liabilities of an insured depository insti- 24 tution requiring approval under section 18(c) of 25 VerDate Sep 11 2014 04:36 Jan 21, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H9059.IH H9059 pbinns on DSKJLVW7X2PROD with BILLS 5 •HR 9059 IH the Federal Deposit Insurance Act or under 1 regulations issued under the authority of title 2 IV of the National Housing Act; or 3 (F) the acquisition of shares in, or the as- 4 sets of, an insured depository institution requir- 5 ing approval under section 3 of the Bank Hold- 6 ing Company Act of 1956 or section 408(e) of 7 the National Housing Act. 8 (2) APPROPRIATE FINANCIAL REGULATOR.— 9 The term ‘‘appropriate financial regulator’’ has the 10 meaning given in section 803 of the Payment, Clear- 11 ing, and Settlement Supervision Act of 2010 (12 12 U.S.C. 5462). 13 (3) COVERED FINANCIAL INSTITUTION.—The 14 term ‘‘covered financial institution’’ means— 15 (A) an insured depository institution (as 16 defined in section 3 of the Federal Deposit In- 17 surance Act (12 U.S.C. 1813)); 18 (B) a depository institution holding com- 19 pany (as defined in such section); 20 (C) an investment adviser or investment 21 company (as defined in section 202 of the In- 22 vestment Advisers Act of 1940 (15 U.S.C. 80b– 23 2)); 24 VerDate Sep 11 2014 04:36 Jan 21, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H9059.IH H9059 pbinns on DSKJLVW7X2PROD with BILLS 6 •HR 9059 IH (D) a covered broker or dealer (as defined 1 in section 201(a)(7) of the Dodd-Frank Wall 2 Street Reform and Consumer Protection Act 3 (12 U.S.C. 5381(a)(7))); 4 (E) admitted insurers; 5 (F) an insured credit union (as defined in 6 section 101 of the Federal Credit Union Act 7 (12 U.S.C. 1752)); 8 (G) a non-bank lender; and 9 (H) any entity that has been identified as 10 systemically important by the Financial Sta- 11 bility Oversight Council. 12 (4) ENVIRONMENTALLY SUSTAINABLE INVEST- 13 MENT.—The term ‘‘environmentally sustainable in- 14 vestment’’ means investments, loans, and other fi- 15 nancial products or services that support climate 16 mitigation and adaptation efforts, enterprises, and 17 projects whose impacts have been evaluated to equi- 18 tably and sustainably advance social and environ- 19 mental welfare. 20 (b) APPLICATION OF ENTIRE COMMUNITY.—For 21 purposes of this Act, with respect to a covered financial 22 institution whose business predominately consists of serv- 23 ing the needs of military personnel who are not located 24 within a defined geographic area, such covered financial 25 VerDate Sep 11 2014 04:36 Jan 21, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H9059.IH H9059 pbinns on DSKJLVW7X2PROD with BILLS 7 •HR 9059 IH institution may define the term ‘‘entire community’’ to in- 1 clude the entire deposit customer base without regard to 2 geographic proximity to the covered financial institution. 3 SEC. 4. ASSESSMENT OF COVERED FINANCIAL INSTITU- 4 TIONS. 5 (a) IN GENERAL.—Except as provided in section 6, 6 not less than once every 24 months an appropriate finan- 7 cial regulator shall assess the record of a covered financial 8 institution of meeting the environmentally sustainable in- 9 vestment needs of the entire community of such institu- 10 tion, including low- and moderate-income neighborhoods, 11 consistent with the safe and sound operation of such insti- 12 tution. 13 (b) REQUIREMENTS FOR COVERED FINANCIAL IN- 14 STITUTIONS.— 15 (1) RATING.— 16 (A) IN GENERAL.—A covered financial in- 17 stitution that received a rating described in 18 subparagraph (C), (D), or (E) of section 19 5(b)(2) shall, within the 12-month period begin- 20 ning on the date of receipt of such rating, take 21 such action as may be necessary in order for 22 such institution to achieve a rating of ‘‘satisfac- 23 tory record of meeting community environ- 24 mentally sustainable investment needs’’. 25 VerDate Sep 11 2014 04:36 Jan 21, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H9059.IH H9059 pbinns on DSKJLVW7X2PROD with BILLS 8 •HR 9059 IH (B) PENALTY.—A covered financial insti- 1 tution that fails to meet the requirements of 2 subparagraph (A) shall be subject to such pen- 3 alties as determined appropriate by the appro- 4 priate financial regulator of such institution. 5 (2) APPROVAL OF REQUESTS.—With respect to 6 any request submitted by a covered financial institu- 7 tion to the appropriate financial regulator to take an 8 action that requires the approval of the regulator, 9 the appropriate financial regulator may only approve 10 such request if the covered financial institution re- 11 ceived a rating of ‘‘satisfactory record of meeting 12 community environmentally sustainable investment 13 needs’’ or better during the most recent examination 14 of the covered financial institution under this sec- 15 tion. 16 (c) MAJORITY-OWNED INSTITUTIONS.—In assessing 17 and taking into account, under subsection (a), the record 18 of a nonminority-owned and nonwomen-owned covered fi- 19 nancial institution, the appropriate financial regulator 20 may consider as a factor capital investment, loan partici- 21 pation, and other ventures undertaken by such covered fi- 22 nancial institution in cooperation with minority- and 23 women-owned financial institutions and low-income credit 24 unions, if such activities help meet the environmentally 25 VerDate Sep 11 2014 04:36 Jan 21, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H9059.IH H9059 pbinns on DSKJLVW7X2PROD with BILLS 9 •HR 9059 IH sustainable investment needs of the local communities in 1 which such covered financial institution is chartered. 2 (d) FINANCIAL HOLDING COMPANY REQUIRE- 3 MENT.— 4 (1) IN GENERAL.—An election by a bank hold- 5 ing company to become a financial holding company 6 under section 4 of the Bank Holding Company Act 7 of 1956 shall not be effective if— 8 (A) the Board finds that, as of the date 9 the declaration of such election and the certifi- 10 cation is filed by such holding company under 11 section 4(l)(1)(C) of the Bank Holding Com- 12 pany Act of 1956, not all of the subsidiary in- 13 sured depository institutions of the bank hold- 14 ing company had achieved a rating of ‘‘satisfac- 15 tory record of meeting community environ- 16 mentally sustainable investment needs’’, or bet- 17 ter, at the most recent examination of each 18 such institution; and 19 (B) the Board notifies the company of 20 such finding before the end of the 30-day pe- 21 riod beginning on such date. 22 (2) LIMITED EXCLUSIONS FOR NEWLY AC- 23 QUIRED INSURED DEPOSITORY INSTITUTIONS.—Any 24 insured depository institution acquired by a bank 25 VerDate Sep 11 2014 04:36 Jan 21, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H9059.IH H9059 pbinns on DSKJLVW7X2PROD with BILLS 10 •HR 9059 IH holding company during the 12-month period pre- 1 ceding the date of the submission to the Board of 2 the declaration and certification under section 3 4(l)(1)(C) of the Bank Holding Company Act of 4 1956 may be excluded for purposes of paragraph (1) 5 during the 12-month period beginning on the date of 6 such acquisition if— 7 (A) the bank holding company has sub- 8 mitted an affirmative plan to the appropriate fi- 9 nancial regulator to take such action as may be 10 necessary in order for such institution to 11 achieve a rating of ‘‘satisfactory record of meet- 12 ing community environmentally sustainable in- 13 vestment needs’’, or better, at the next exam- 14 ination of the institution; and 15 (B) the plan has been accepted by such 16 agency. 17 (3) DEFINITIONS.—For purposes of this sub- 18 section, the following definitions shall apply: 19 (A) BANK HOLDING COMPANY; FINANCIAL 20 HOLDING COMPANY.—The terms ‘‘bank holding 21 company’’ and ‘‘financial holding company’’ 22 have the meanings given those terms in section 23 2 of the Bank Holding Company Act of 1956. 24 VerDate Sep 11 2014 04:36 Jan 21, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H9059.IH H9059 pbinns on DSKJLVW7X2PROD with BILLS 11 •HR 9059 IH (B) BOARD.—The term ‘‘Board’’ means 1 the Board of Governors of the Federal Reserve 2 System. 3 (C) INSURED DEPOSITORY INSTITUTION.— 4 The term ‘‘insured depository institution’’ has 5 the meaning given the term in section 3(c) of 6 the Federal Deposit Insurance Act. 7 SEC. 5. WRITTEN EVALUATIONS. 8 (a) REQUIRED.— 9 (1) IN GENERAL.—Upon the conclusion of each 10 examination of a covered financial institution under 11 section 4, the appropriate financial regulator shall 12 prepare a written evaluation of the institution’s 13 record of meeting the environmentally sustainable 14 investment needs of its entire community, including 15 low- and moderate-income neighborhoods. 16 (2) PUBLIC AND CONFIDENTIAL SECTIONS.— 17 Each written evaluation required under paragraph 18 (1) shall have a public section and a confidential sec- 19 tion. 20 (b) PUBLIC SECTION OF REPORT.— 21 (1) FINDINGS AND CONCLUSIONS.— 22 (A) CONTENTS OF WRITTEN EVALUA- 23 TION.—The public section of the written evalua- 24 tion shall— 25 VerDate Sep 11 2014 04:36 Jan 21, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H9059.IH H9059 pbinns on DSKJLVW7X2PROD with BILLS 12 •HR 9059 IH (i) state the appropriate financial reg- 1 ulator’s conclusions for each assessment 2 factor identified in the regulations pre- 3 scribed by such appropriate financial regu- 4 lator to implement this Act; 5 (ii) discuss the facts and data sup- 6 porting such conclusions; and 7 (iii) contain the rating of the covered 8 financial institution and a statement de- 9 scribing the basis for the rating. 10 (B) METROPOLITAN AREA DISTINC- 11 TIONS.—The information required by clauses (i) 12 and (ii) of subparagraph (A) shall be presented 13 separately for each metropolitan area in which 14 a covered financial institution maintains one or 15 more domestic branch offices. 16 (2) ASSIGNED RATING.—The rat [Text truncated for display. 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