I 

116TH CONGRESS 

1ST SESSION H. R. 5194 

To require the Board of Governors of the Federal Reserve System, in consultation with the heads of other relevant Federal agencies, to develop 

financial risk analyses relating to climate change, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 20, 2019 

Mr. CASTEN of Illinois (for himself, Ms. WILD, Mr. TONKO, Ms. BROWNLEY

of California, Ms. BONAMICI, Mr. KENNEDY, and Mr. PETERS) introduced the following 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 consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To require the Board of Governors of the Federal Reserve 

System, in consultation with the heads of other relevant 

Federal agencies, to develop financial risk analyses relating to climate change, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Climate Change Finan5 cial Risk Act of 2019’’. 


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1 SEC. 2. SENSE OF CONGRESS. 

2 It is the sense of Congress that— 

3 (1) if current trends continue, average global 

4 temperatures are likely to reach 1.5 degrees Celsius 

5 above pre-industrial levels between 2030 and 2050; 

6 (2) global temperature rise has already resulted 

7 in an increased number of heavy rainstorms, coastal 

8 flooding events, heat waves, wildfires, and other ex9 treme events; 

10 (3) since 1980— 

11 (A) the number of extreme weather events 

12 per year that cost the people of the United 

13 States more than $1,000,000,000 per event, ac14 counting for inflation, has increased signifi15 cantly; and 

16 (B) the total cost of extreme weather 

17 events in the United States has exceeded 

18 $1,100,000,000,000; 

19 (4) as physical impacts from climate change are 

20 manifested across multiple sectors of the economy of 

21 the United States— 

22 (A) climate-related economic risks will con23 tinue to increase; 

24 (B) climate-related extreme weather events 

25 will disrupt energy and transportation systems 

26 in the United States, which will result in more 


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1 frequent and longer-lasting power outages, fuel 

2 shortages, and service disruptions in critical 

3 sectors across the economy of the United 

4 States; 

5 (C) projected increases in extreme heat 

6 conditions will lead to decreases in labor pro7 ductivity in agriculture, construction, and other 

8 critical economic sectors; 

9 (D) food and livestock production will be 

10 impacted in regions that experience increases in 

11 heat and drought and small rural communities 

12 will struggle to find the resources needed to 

13 adapt to those changes; and 

14 (E) sea level rise and more frequent and 

15 intense extreme weather events will— 

16 (i) increasingly disrupt and damage 

17 private property and critical infrastructure; 

18 and 

19 (ii) drastically increase insured and 

20 uninsured losses; 

21 (5) advances in energy efficiency and renewable 

22 energy technologies, as well as climate policies and 

23 shifting societal preferences, will— 

24 (A) reduce global demand for fossil fuels; 

25 and 


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1 (B) expose transition risks for fossil fuel 

2 companies and investors, which could include 

3 trillions of dollars of stranded assets around the 

4 world; 

5 (6) climate change poses uniquely far-reaching 

6 risks to the financial services industry, including 

7 with respect to underwriting, credit, and market 

8 risks, due to the number of sectors and locations im9 pacted and the potentially irreversible scale of dam10 age; 

11 (7) financial institutions must take a consistent 

12 approach to assessing climate-related financial risks 

13 and incorporating those risks into existing risk man14 agement practices, which should be informed by sce15 nario analysis; 

16 (8) the Board of Governors conducts annual as17 sessments of the capital adequacy and capital plan18 ning practices of the largest and most complex bank19 ing organizations (referred to in this section as 

20 ‘‘stress tests’’) in order to promote a safe, sound, 

21 and efficient banking and financial system; 

22 (9) as of the date of enactment of this Act, the 

23 stress tests conducted by the Board of Governors are 

24 not designed to reflect the physical risks or transi25 tion risks posed by climate change; and 


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1 (10) the Board of Governors— 

2 (A) has the authority to take into account 

3 the potentially systemic impact of climate-re4 lated risks on the financial system; and 

5 (B) should develop new analytical tools 

6 with longer time horizons to accurately assess 

7 and manage the risks described in subpara8 graph (A). 

9 SEC. 3. DEFINITIONS. 

10 In this Act: 

11 (1) BANK HOLDING COMPANY.—The term 

12 ‘‘bank holding company’’ has the meaning given the 

13 term in section 102(a) of the Financial Stability Act 

14 of 2010 (12 U.S.C. 5311(a)). 

15 (2) BOARD OF GOVERNORS.—The term ‘‘Board 

16 of Governors’’ means the Board of Governors of the 

17 Federal Reserve System. 

18 (3) CLIMATE SCIENCE LEADS.—The term ‘‘cli19 mate science leads’’ means— 

20 (A) the Administrator of the National Oce21 anic and Atmospheric Administration; 

22 (B) the Administrator of the Environ23 mental Protection Agency; 

24 (C) the Secretary of Energy; 


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1 (D) the Administrator of the National Aer2 onautics and Space Administration; 

3 (E) the Director of the United States Geo4 logical Survey; 

5 (F) the Secretary of the Interior; and 

6 (G) the head of any other Federal agency 

7 that the Board of Governors determines to be 

8 appropriate. 

9 (4) COVERED ENTITY.—The term ‘‘covered en10 tity’’ means— 

11 (A) a nonbank financial company or bank 

12 holding company that has not less than 

13 $250,000,000,000 in total consolidated assets; 

14 and 

15 (B) a nonbank financial company or bank 

16 holding company— 

17 (i) that has not less than 

18 $100,000,000,000 in total consolidated as19 sets; and 

20 (ii) with respect to which the Board of 

21 Governors determines the application of 

22 subparagraph (C) of section 165(i)(1) of 

23 the Financial Stability Act of 2010 (12 

24 U.S.C. 5365(i)(1)), as added by section 6 

25 of this Act, is appropriate— 


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1 (I) to— 

2 (aa) prevent or mitigate 

3 risks to the financial stability of 

4 the United States; or 

5 (bb) promote the safety and 

6 soundness of the company; and 

7 (II) after taking into consider8 ation— 

9 (aa) the capital structure, 

10 riskiness, complexity, financial 

11 activities, and size of the com12 pany, including the financial ac13 tivities of any subsidiary of the 

14 company; and 

15 (bb) any other risk-related 

16 factor that the Board of Gov17 ernors determines to be appro18 priate. 

19 (5) NONBANK FINANCIAL COMPANY.—The term 

20 ‘‘nonbank financial company’’ has the meaning given 

21 the term in section 102(a)(4)(C) of the Financial 

22 Stability Act of 2010 (12 U.S.C. 5311(a)(4)(C)). 

23 (6) PHYSICAL RISKS.—The term ‘‘physical 

24 risks’’ means financial risks to assets, locations, opVerDate Sep 11 2014 02:31 Nov 28, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H5194.IH H5194

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1 erations, or value chains that result from exposure 

2 to physical climate-related effects, including— 

3 (A) increased average global temperatures; 

4 (B) increased severity and frequency of ex5 treme weather events; 

6 (C) increased flooding; 

7 (D) sea level rise; 

8 (E) ocean acidification; 

9 (F) increased severity and frequency of 

10 heat waves; 

11 (G) increased frequency of wildfires; 

12 (H) decreased arability of farmland; and 

13 (I) decreased availability of fresh water. 

14 (7) TECHNICAL DEVELOPMENT GROUP.—The 

15 term ‘‘Technical Development Group’’ means the 

16 Climate Risk Scenario Technical Development Group 

17 established under section 4. 

18 (8) TRANSITION RISKS.—The term ‘‘transition 

19 risks’’ means financial risks that are attributable to 

20 climate change mitigation and adaptation, including 

21 efforts to reduce greenhouse gas emissions and 

22 strengthen resilience to the impacts of climate 

23 change, including— 

24 (A) costs relating to— 


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1 (i) international treaties and agree2 ments; 

3 (ii) Federal, State, and local policies; 

4 (iii) new technologies; 

5 (iv) changing markets; 

6 (v) reputational impacts relevant to 

7 changing consumer behavior; and 

8 (vi) litigation; and 

9 (B) a loss in the value, or the stranding, 

10 of assets due to any of the costs described in 

11 clauses (i) through (vi) of subparagraph (A). 

12 (9) VALUE CHAIN.—The term ‘‘value chain’’— 

13 (A) means the total lifecycle of a product 

14 or service, both before and after production of 

15 the product or service, as applicable; and 

16 (B) may include the sourcing of materials, 

17 production, and disposal with respect to the 

18 product or service described in subparagraph 

19 (A). 

20 SEC. 4. CLIMATE RISK SCENARIO TECHNICAL DEVELOP21 MENT GROUP. 

22 (a) ESTABLISHMENT.—The Board of Governors shall 

23 establish a technical advisory group to be known as the 

24 Climate Risk Scenario Technical Development Group. 

25 (b) MEMBERSHIP.— 


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1 (1) COMPOSITION.—The Technical Develop2 ment Group shall be composed of 10 members— 

3 (A) 5 of whom shall be climate scientists; 

4 and 

5 (B) 5 of whom shall be economists, with 

6 expertise in either the United States financial 

7 system or the risks posed by climate change. 

8 (2) SELECTION.—The Board of Governors shall 

9 select the members of the Technical Development 

10 Group after consultation with the climate science 

11 leads. 

12 (c) DUTIES.—The Technical Development Group 

13 shall— 

14 (1) provide recommendations to the Board of 

15 Governors regarding the development of, and up16 dates to, the climate change risk scenarios under 

17 section 5; 

18 (2) after the establishment of the climate 

19 change risk scenarios under section 5, determine the 

20 financial and economic risks resulting from those 

21 scenarios; 

22 (3) make any final work product and any data 

23 sets or other inputs used in the development of the 

24 final work product, publicly available; and 


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1 (4) provide technical assistance to covered enti2 ties on assessing physical risks or transition risks. 

3 (d) INAPPLICABILITY OF FEDERAL ADVISORY COM4 MITTEE ACT.—The Federal Advisory Committee Act (5 

5 U.S.C. App.) shall not apply with respect to the Technical 

6 Development Group. 

7 SEC. 5. DEVELOPMENT AND UPDATING OF CLIMATE 

8 CHANGE RISK SCENARIOS. 

9 (a) IN GENERAL.— 

10 (1) INITIAL DEVELOPMENT.—Not later than 1 

11 year after the date of enactment of this Act, the 

12 Board of Governors, in coordination with the climate 

13 science leads, and taking into consideration the rec14 ommendations of the Technical Development Group, 

15 shall develop 3 separate climate change risk sce16 narios as follows: 

17 (A) One scenario that assumes an average 

18 increase in global temperatures of 1.5 degrees 

19 Celsius above pre-industrial levels. 

20 (B) One scenario that assumes an average 

21 increase in global temperatures of 2 degrees 

22 Celsius above pre-industrial levels. 

23 (C) One scenario that— 

24 (i) assumes the likely and very likely 

25 average increase in global temperatures 


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1 that can be expected, taking into consider2 ation the extent to which national policies 

3 and actions relating to climate change have 

4 been implemented, as of the date on which 

5 the scenario is developed, or on which the 

6 scenario is updated under paragraph (2), 

7 as applicable; and 

8 (ii) does not take into consideration 

9 commitments for policies and actions relat10 ing to climate change that, as of the appli11 cable date described in clause (i), have not 

12 been implemented. 

13 (2) UPDATES.—After the initial development of 

14 the climate change risk scenarios under paragraph 

15 (1), the Board of Governors, in coordination with 

16 the climate science leads, and taking into consider17 ation the recommendations of the Technical Devel18 opment Group, shall update those scenarios once 

19 every 3 years. 

20 (3) INTERNATIONAL COORDINATION.—In devel21 oping and updating the 3 scenarios required under 

22 this subsection, the Board of Governors shall take 

23 into consideration analytic tools and best practices 

24 developed by international banking supervisors relat25 ing to climate risks and scenario analysis in an efVerDate Sep 11 2014 02:31 Nov 28, 2019 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H5194.IH H5194

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1 fort to develop consistent and comparable data-driv2 en scenarios. 

3 (4) RECOMMENDATIONS.—If the Technical De4 velopment Group determines that the average in5 crease in global temperatures described in subpara6 graph (A) or (B) of paragraph (1) is no longer sci7 entifically valid, the Technical Development Group 

8 may recommend that the Board of Governors, in co9 ordination with the climate science leads, update the 

10 average increase in global temperatures described in 

11 the applicable subparagraph to reflect the most cur12 rent assessment of climate change science. 

13 (b) CONSIDERATIONS.—In developing and updating 

14 each of the 3 scenarios required under subsection (a), the 

15 Board of Governors, in coordination with the climate 

16 science leads, shall account for physical risks and transi17 tion risks that may disrupt business operations across the 

18 global economy, including through— 

19 (1) disruptions with respect to— 

20 (A) the sourcing of materials; 

21 (B) production; and 

22 (C) the disposal of products and services; 

23 (2) changes in the availability and prices of raw 

24 materials and other inputs; 


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1 (3) changes in agricultural production and with 

2 respect to food security; 

3 (4) direct damages to fixed assets; 

4 (5) increases in costs associated with insured or 

5 uninsured losses; 

6 (6) changes in asset values; 

7 (7) impacts on— 

8 (A) aggregate demand for products and 

9 services; 

10 (B) labor productivity; 

11 (C) asset liquidity; and 

12 (D) credit availability; 

13 (8) mass migration and increases in disease and 

14 mortality rates; 

15 (9) international conflict, as such conflict re16 lates to global economic activity and output; and 

17 (10) changes in any other microeconomic or 

18 macroeconomic condition that the Board of Gov19 ernors, in coordination with the climate science 

20 leads, determines to be relevant. 

21 SEC. 6. CLIMATE-RELATED ENHANCED SUPERVISION FOR 

22 CERTAIN NONBANK FINANCIAL COMPANIES 

23 AND BANK HOLDING COMPANIES. 

24 Section 165(i)(1) of the Financial Stability Act of 

25 2010 (12 U.S.C. 5365(i)(1)) is amended— 


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1 (1) in subparagraph (B)(i), by inserting ‘‘except 

2 as provided in subparagraph (C)(ii)(I),’’ before 

3 ‘‘shall provide’’; and 

4 (2) by adding at the end the following: 

5 ‘‘(C) BIENNIAL TESTS REQUIRED.— 

6 ‘‘(i) DEFINITIONS.—In this subpara7 graph— 

8 ‘‘(I) the term ‘capital distribu9 tion’ has the meaning given the term 

10 in section 225.8 of title 12, Code of 

11 Federal Regulations, as in effect on 

12 the date of enactment of this subpara13 graph; 

14 ‘‘(II) the term ‘capital policy’ has 

15 the meaning given the term in section 

16 225.8(d)(8) of title 12, Code of Fed17 eral Regulations, as in effect on the 

18 date of enactment of this subpara19 graph; and 

20 ‘‘(III) the terms ‘climate science 

21 leads’ and ‘covered entity’ have the 

22 meanings given those terms in section 

23 3 of the Climate Change Financial 

24 Risk Act of 2019. 

25 ‘‘(ii) TESTS.— 


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1 ‘‘(I) IN GENERAL.—Subject to 

2 the other requirements of this clause, 

3 the Board of Governors, in coordina4 tion with the appropriate primary fi5 nancial regulatory agencies and the 

6 climate science leads, shall conduct bi7 ennial analyses in which each covered 

8 entity is subject to evaluation, under 

9 an adverse set of conditions, of wheth10 er that covered entity has the capital, 

11 on a total consolidated basis, nec12 essary to absorb financial losses that 

13 would arise under each climate change 

14 risk scenario developed under section 

15 5 of the Climate Change Financial 

16 Risk Act of 2019. 

17 ‘‘(II) INITIAL TESTS.—With re18 spect to each of the first 3 analyses 

19 conducted under subclause (I)— 

20 ‘‘(aa) the covered entity to 

21 which such an analysis applies 

22 shall not be subject to any ad23 verse consequences as a result of 

24 the analysis; and 


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1 ‘‘(bb) the Board of Gov2 ernors shall— 

3 ‘‘(AA) not later than 60 

4 days after the date on which 

5 the Board of Governors 

6 completes each such anal7 ysis, make a summary of the 

8 analysis publicly available; 

9 and 

10 ‘‘(BB) submit a copy of 

11 the results of the analysis to 

12 the Committee on Banking, 

13 Housing, and Urban Affairs 

14 of the Senate and the Com15 mittee on Financial Services 

16 of the House of Representa17 tives. 

18 ‘‘(III) CLIMATE RISK CAPITAL

19 POLICY.— 

20 ‘‘(aa) IN GENERAL.—Except 

21 with respect to the first analysis 

22 conducted under subclause (I), 

23 each covered entity shall, before 

24 being subject to an analysis 

25 under that subclause, submit to 


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1 the Board of Governors a capital 

2 policy with respect to climate risk 

3 planning (referred to in this sub4 clause as a ‘climate risk capital 

5 policy’), which shall be based on 

6 the results of the most recently 

7 conducted analysis of the covered 

8 entity under that subclause. 

9 ‘‘(bb) REJECTION.—Except 

10 as provided in subclause (II)(aa), 

11 the Board of Governors may ob12 ject to a climate risk capital pol13 icy submitted by a covered entity 

14 under item (aa) if the Board of 

15 Governors determines that— 

16 ‘‘(AA) the covered enti17 ty has not demonstrated a 

18 reasonable plan to maintain 

19 capital above each minimum 

20 regulatory capital ratio on a 

21 pro forma basis under the 

22 adverse set of conditions de23 scribed in subclause (I); 

24 ‘‘(BB) the climate risk 

25 capital policy is otherwise 


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1 not reasonable or appro2 priate; 

3 ‘‘(CC) the assumptions 

4 and analysis underlying the 

5 climate risk capital policy, or 

6 the methodologies and prac7 tices that support the cli8 mate risk capital policy, are 

9 not reasonable or appro10 priate; or 

11 ‘‘(DD) the climate risk 

12 capital policy otherwise con13 stitutes an unsafe or un14 sound practice. 

15 ‘‘(cc) GENERAL DISTRIBU16 TION LIMITATION.—If the Board 

17 of Governors, under item (bb), 

18 objects to a climate risk capital 

19 policy submitted by a covered en20 tity under item (aa), the covered 

21 entity may not make any capital 

22 distribution, other than a capital 

23 distribution arising from the 

24 issuance of a regulatory capital 

25 instrument eligible for inclusion 


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1 in the numerator of a minimum 

2 regulatory capital ratio.’’. 

3 SEC. 7. FINANCIAL STABILITY OVERSIGHT COUNCIL. 

4 (a) IN GENERAL.—The Financial Stability Oversight 

5 Council shall establish a subcommittee of the Council that 

6 shall support the Council in identifying risks to, and in 

7 responding to emerging threats to, the stability of the 

8 United States financial system as a result of climate 

9 change. 

10 (b) RESPONSIBILITIES.— 

11 (1) SUBCOMMITTEE.—The subcommittee estab12 lished under subsection (a) shall, not later than 1 

13 year after the completion of the first analysis re14 quired under subparagraph (C) of section 165(i)(1) 

15 of the Financial Stability Act of 2010 (12 U.S.C. 

16 5365(i)(1)), as added by section 6 of this Act, and 

17 in consultation with the Office of Financial Re18 search, submit to Congress an assessment of the risk 

19 posed by climate change to the efficiency, competi20 tiveness, and stability of the United States financial 

21 system as a whole. 

22 (2) COUNCIL.—For each year after the year in 

23 which the assessment required under paragraph (1) 

24 is submitted, the Financial Stability Oversight Coun25 cil shall include in the annual report required under 


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1 section 112(a)(2)(N) of the Financial Stability Act 

2 of 2010 (12 U.S.C. 5322(a)(2)(N)) an update to 

3 that assessment. 

4 (c) COMPOSITION.—The subcommittee established 

5 under subsection (a) shall be composed of— 

6 (1) the Chairman of the Board of Governors of 

7 the Federal Reserve System; 

8 (2) the Secretary of the Treasury; 

9 (3) the Comptroller of the Currency; 

10 (4) the Chairperson of the Board of Directors 

11 of the Federal Deposit Insurance Corporation; 

12 (5) the Chairman of the Securities and Ex13 change Commission; 

14 (6) the Chairperson of the Commodity Futures 

15 Trading Commission; and 

16 (7) any other voting or nonvoting members that 

17 the Financial Stability Oversight Council determines 

18 to be appropriate. 

Æ 


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