II 

118TH CONGRESS 

1ST SESSION S. 1138 

To amend the Bank Holding Company Act of 1956 and the Financial Stability Act of 2010 to require a reduction of financed emissions to protect 

financial stability, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MARCH 30, 2023 

Mr. MARKEY (for himself, Mr. MERKLEY, and Mr. SANDERS) introduced the 

following bill; which was read twice and referred to the Committee on 

Banking, Housing, and Urban Affairs 

A BILL 

To amend the Bank Holding Company Act of 1956 and 

the Financial Stability Act of 2010 to require a reduction 

of financed emissions to protect financial stability, 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 ‘‘Fossil Free Finance 

5 Act of 2023’’. 


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1 SEC. 2. ALIGNMENT OF FINANCED EMISSIONS WITH 

2 SCIENCE-BASED TARGETS. 

3 The Bank Holding Company Act of 1956 (12 U.S.C. 

4 1841 et seq.) is amended by adding at the end the fol5 lowing: 

6 ‘‘SEC. 15. ALIGNMENT OF FINANCED EMISSIONS WITH 

7 SCIENCE-BASED TARGETS. 

8 ‘‘(a) DEFINITIONS.—In this section: 

9 ‘‘(1) Carbon offsets—The term ‘carbon offsets’ 

10 means an emissions reduction or removal of green11 house gases in a manner calculated and traced for 

12 the purpose of offsetting an entity’s greenhouse gas 

13 emissions. 

14 ‘‘(2) COVERED BANK HOLDING COMPANY.—The 

15 term ‘covered bank holding company’ means a bank 

16 holding company with total consolidated assets not 

17 less than $50,000,000,000. 

18 ‘‘(3) DEFORESTATION RISK COMMODITIES.— 

19 The term ‘deforestation risk commodities’ means 

20 globally traded goods and raw materials— 

21 ‘‘(A) that originate from natural forest 

22 ecosystems— 

23 ‘‘(i) directly from within forest areas; 

24 or 

25 ‘‘(ii) from areas previously under for26 est cover; and 


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1 ‘‘(B) the extraction or production of which 

2 contributes significantly to the conversion of 

3 natural forest to agriculture, tree plantation, or 

4 other nonforest land use. 

5 ‘‘(4) FINANCED EMISSIONS.—The term ‘fi6 nanced emissions’ means, with respect to a covered 

7 bank holding company, and any nonbank financial 

8 company supervised by the Board in accordance with 

9 section 113 of the Financial Stability Act of 2010 

10 (12 U.S.C. 5323), the greenhouse gas emissions of 

11 such company, expressed in metric tons of carbon di12 oxide equivalent, attributable to investment in, or 

13 the providing of financial services to, another com14 pany or project of another company, including— 

15 ‘‘(A) investments in a debt or equity in16 vestment in such another company or the assets 

17 of such another company; 

18 ‘‘(B) project finance investment; 

19 ‘‘(C) underwriting; 

20 ‘‘(D) syndication or securitization of loans 

21 or asset-backed securities; 

22 ‘‘(E) derivative transactions related to fi23 nancing or hedging; and 

24 ‘‘(F) market making. 


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1 ‘‘(5) FOSSIL FUEL FINANCING.—The term ‘fos2 sil fuel financing’ means, with respect to a covered 

3 bank holding company, investment in— 

4 ‘‘(A) a company that derives not less than 

5 15 percent revenue from exploration, extraction, 

6 processing, exporting, transporting, and any 

7 other significant action with respect to oil, nat8 ural gas, coal, or any byproduct thereof; or 

9 ‘‘(B) a fossil fuel project. 

10 ‘‘(6) FOSSIL FUEL PROJECT.—The term ‘fossil 

11 fuel project’ means a project intended to— 

12 ‘‘(A) facilitate or expand exploration, ex13 traction, processing, exporting, transporting, or 

14 any other significant action with respect to oil, 

15 natural gas, coal; or 

16 ‘‘(B) construct any infrastructure related 

17 to the activities described in subparagraph (A), 

18 such as wells, pipelines, terminals, refineries, or 

19 utility-sale generation facilities. 

20 ‘‘(7) GREENHOUSE GAS.—The term ‘greenhouse 

21 gas’ means carbon dioxide, methane, nitrous oxide, 

22 nitrogen trifluoride, hydrofluorocarbons, 

23 perfluorocarbons, and sulfur hexafluoride. 

24 ‘‘(8) NATURAL FOREST.—The term ‘natural 

25 forest’ means a natural arboreal ecosystem that— 


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1 ‘‘(A) has a species composition a signifi2 cant percentage of which is native species; and 

3 ‘‘(B) contains a tree canopy cover of more 

4 than 10 percent over an area of not less than 

5 0.5 hectares. 

6 ‘‘(9) NEW OR EXPANDED FOSSIL FUEL

7 PROJECT.—The term ‘new or expanded fossil fuel 

8 project’ means a fossil fuel project that would in9 crease the— 

10 ‘‘(A) level of proven or developable oil, nat11 ural gas, or coal reserves; 

12 ‘‘(B) midstream throughput of pipelines, 

13 terminals, or refineries; or 

14 ‘‘(C) combustion of oil, natural gas, or coal 

15 for utility-scale electricity generation. 

16 ‘‘(b) REQUIREMENTS.—Not later than 210 days after 

17 the date of enactment of this section, and not less than 

18 once every 2 years thereafter, a covered bank holding com19 pany shall— 

20 ‘‘(1) submit to the Board an emission reduction 

21 plan for reducing emissions in accordance with this 

22 section; and 

23 ‘‘(2) if the plan is accepted under subsection 

24 (d), implement such plan. 


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1 ‘‘(c) ELEMENTS OF PLAN.—Each plan required 

2 under subsection (b)(1)— 

3 ‘‘(1) shall include— 

4 ‘‘(A) a plan for the covered bank holding 

5 company to reach zero financed emissions not 

6 later than January 1, 2050; 

7 ‘‘(B) a plan to reduce the financed emis8 sions of the bank holding company by 50 per9 cent not later than January 1, 2030; 

10 ‘‘(C) a plan to discontinue new or ex11 panded fossil fuel projects not later than 60 

12 days after the date of enactment of this section; 

13 ‘‘(D) a plan for the covered bank holding 

14 company to discontinue thermal coal financing 

15 not later than January 1, 2025; 

16 ‘‘(E) a plan for the covered bank holding 

17 company to discontinue all fossil fuel financing 

18 not later than January 1, 2030; 

19 ‘‘(F) a plan for the covered bank holding 

20 company to eliminate financing of deforestation 

21 risk commodities; and 

22 ‘‘(G) such other requirements as the Board 

23 determines is necessary to protect the financial 

24 stability of the United States; 

25 ‘‘(2) may not include carbon offsets; 


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1 ‘‘(3) may include proven negative carbon emis2 sion technologies to meet the requirements under 

3 paragraph (1)(A) if the technologies do not nega4 tively impact low-income, minority, or indigenous 

5 communities; 

6 ‘‘(4) shall prioritize— 

7 ‘‘(A) the covered bank holding company 

8 withdrawing funding from companies and 

9 projects that have a disproportionately negative 

10 impact on the health and well-being of low-in11 come and minority communities; 

12 ‘‘(B) lending to companies for purposes of 

13 carrying out severance, retraining, and other 

14 benefits to workers impacted by the transition 

15 to zero financed emissions; and 

16 ‘‘(C) enhanced due diligence about the im17 pacts of financing on biodiversity and commu18 nity and the framework of the client for and 

19 track record in— 

20 ‘‘(i) managing greenhouse gas and 

21 other emissions; and 

22 ‘‘(ii) compliance with regulations and 

23 international standards. 


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1 ‘‘(d) CONSIDERATION OF PLAN.—Not later than 180 

2 days after the date on which the Board receives a plan 

3 submitted under subsection (b)(1), the Board shall— 

4 ‘‘(1) accept the plan; or 

5 ‘‘(2)(A) reject the plan if the plan does not 

6 align with science-based targets without the use of 

7 offsets or unproven carbon emission reduction tech8 nologies; and 

9 ‘‘(B) require the covered bank holding company 

10 to revise such plan in accordance with the sugges11 tions of the Board. 

12 ‘‘(e) PENALTIES.—If a covered bank holding com13 pany does not submit a plan in accordance with this sec14 tion or meet the requirements set out in such a plan— 

15 ‘‘(1) the Board shall— 

16 ‘‘(A) apply the penalties under section 8 

17 under regulations prescribed by the Board; 

18 ‘‘(B) require divestiture of assets in order 

19 to bring the financed emissions of a covered 

20 bank holding company into compliance with the 

21 requirements set out in such a plan; and 

22 ‘‘(C) notify the Board of Directors of the 

23 Federal Deposit Insurance Corporation of the 

24 noncompliance of the covered bank holding 

25 company; and 


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1 ‘‘(2) the Board of Directors of the Federal De2 posit Insurance Corporation may, with respect to 

3 any covered bank holding company described in 

4 paragraph (1)(C) or a subsidiary of the bank hold5 ing company that contributes to the failure of the 

6 covered bank holding company to comply with this 

7 section— 

8 ‘‘(A) terminate the insured status of the 

9 insured depository institution of which the bank 

10 holding company has control under section 

11 8(a)(2) of the Federal Deposit Insurance Act 

12 (12 U.S.C. 1818(a)(2)); and 

13 ‘‘(B) carry out any other corrective action 

14 available under section 38 of the Federal De15 posit Insurance Act (12 U.S.C. 1831o) for the 

16 insured depository institution of which the bank 

17 holding company has control under section 

18 8(a)(2) of the Federal Deposit Insurance Act 

19 (12 U.S.C. 1818(a)(2)). 

20 ‘‘(f) REGULATIONS.—Not later than 180 days after 

21 the date of enactment of this section, the Board shall issue 

22 regulations establishing the format and timing for submis23 sion of the plans required under this section.’’. 


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1 SEC. 3. CONTRIBUTION TO CLIMATE CHANGE INCLUDED IN 

2 FSOC DESIGNATION. 

3 (a) AUTHORITY TO REQUIRE SUPERVISION AND

4 REGULATION OF CERTAIN NONBANK FINANCIAL COMPA5 NIES.—Section 113 of the Financial Stability Act of 2010 

6 (12 U.S.C. 5323) is amended— 

7 (1) in subsection (a)(2)— 

8 (A) in subparagraph (J), by striking ‘‘and’’ 

9 at the end; 

10 (B) by redesignating subparagraph (K) as 

11 subparagraph (L); and 

12 (C) by inserting after subparagraph (J) 

13 the following: 

14 ‘‘(K) the extent to which the company 

15 makes a nontrivial contribution to the financed 

16 emissions, as defined in section 15 of the Bank 

17 Holding Company Act of 1956, of the financial 

18 system of the United States; and’’; and 

19 (2) in subsection (b)(2)— 

20 (A) in subparagraph (J), by striking ‘‘and’’ 

21 at the end; 

22 (B) by redesignating subparagraph (K) as 

23 subparagraph (L); and 

24 (C) by inserting after subparagraph (J) 

25 the following: 


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1 ‘‘(K) the extent to which the company 

2 makes a nontrivial contribution to the financed 

3 emissions, as defined in section 15 of the Bank 

4 Holding Company Act of 1956, of the financial 

5 system of the United States; and’’. 

6 (b) ENHANCED SUPERVISION AND PRUDENTIAL

7 STANDARDS FOR NONBANK FINANCIAL COMPANIES SU8 PERVISED BY THE BOARD OF GOVERNORS AND CERTAIN

9 BANK HOLDING COMPANIES.— 

10 (1) DEVELOPMENT OF PRUDENTIAL STAND11 ARDS.—Section 115(b)(1) of the Financial Stability 

12 Act of 2010 (12 U.S.C. 5325(b)(1)) is amended— 

13 (A) in subparagraph (H), by striking 

14 ‘‘and’’; 

15 (B) in subparagraph (I), by striking the 

16 period at the end and inserting ‘‘; and’’; and 

17 (C) by adding at the end the following: 

18 ‘‘(J) divestiture of financed emissions, as 

19 defined in section 15 of the Bank Holding Com20 pany Act of 1956.’’. 

21 (2) REQUIRED STANDARDS.—Section 

22 165(b)(1)(A) of the Financial Stability Act of 2010 

23 (12 U.S.C. 5365(b)(1)(A)) is amended— 

24 (A) in clause (iv), by striking ‘‘and’’ at the 

25 end; 


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1 (B) in clause (v), by striking the period 

2 and inserting ‘‘; and’’; and 

3 (C) by adding at the end the following: 

4 ‘‘(vi) emissions reduction plans in ac5 cordance with section 15 of the Bank 

6 Holding Company Act of 1956.’’. 

7 SEC. 4. REPORTS. 

8 (a) DEFINITIONS.—In this section: 

9 (1) COVERED BANK HOLDING COMPANY; FI10 NANCED EMISSIONS.—The terms ‘‘covered bank 

11 holding company’’ and ‘‘financed emissions’’ have 

12 the meanings given the terms in section 15 of the 

13 Bank Holding Company Act of 1956, as added by 

14 section 2 of this Act. 

15 (2) SCIENCE-BASED EMISSIONS TARGETS.—The 

16 term ‘‘science-based emissions targets’’ means reduc17 tion in greenhouse gas emissions consistent with pre18 venting an increase in global average temperature of 

19 not less than 1.5 degrees Celsius compared to pre20 industrial levels. 

21 (b) INITIAL REPORT.—Not later than 180 days after 

22 the date of enactment of this Act, the Board of Governors 

23 of the Federal Reserve System shall submit to Congress 

24 a report that— 


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1 (1) identifies the current level of financed emis2 sions in the financial system of the United States; 

3 (2) includes an analysis of trends in financed 

4 emissions reductions; 

5 (3) includes a summary of the commitments of 

6 covered bank holding companies to reduce financed 

7 emissions; 

8 (4) estimates the financed emissions in the fi9 nancial system of the United States needed to meet 

10 science-based emissions targets; 

11 (5) identifies regulatory gaps in reducing fi12 nanced emissions that cannot be addressed with au13 thorities of the Board and recommendations for ad14 dressing such gaps; 

15 (6) identifies data quality challenges for assess16 ing financed emissions and recommendations to ad17 dress those challenges; 

18 (7) identifies the equitable transition needs for 

19 workers and communities that will be impacted by a 

20 shift to a zero financed emissions economy; 

21 (8) analyzes— 

22 (A) the number and groups of people af23 fected by a transition to zero financed emis24 sions; and 


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1 (B) the economic impact of such a transi2 tion with respect to such groups; and 

3 (9) identifies regulatory and legislative options 

4 for mitigating the economic impacts described in 

5 paragraph (8)(B), including— 

6 (A) the use of existing authorities, includ7 ing the Community Reinvestment Act of 1977 

8 (12 U.S.C. 2901 et seq.) and emergency lend9 ing powers under section 13 of the Federal Re10 serve Act (12 U.S.C. 342); and 

11 (B) the establishment of a public invest12 ment bank to finance investment in an equi13 table transition to a zero financed emissions 

14 economy. 

15 (c) PERIODIC REPORT.—Not later than 180 days 

16 after the date of enactment of this Act, and not less than 

17 once every 2 years thereafter, the Board of Governors of 

18 the Federal Reserve System shall submit to Congress a 

19 report that includes— 

20 (1) an analysis of the progress against aligning 

21 with financed emissions targets; 

22 (2) the estimates described in subsection (b)(4); 

23 (3) an analysis of the progress made in the pre24 ceding 2 years toward an equitable transition to a 

25 zero financed emissions economy; and 


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1 (4) recommendations with respect to assistance 

2 Congress and Federal agencies may provide to— 

3 (A) facilitate a reduction of financed emis4 sions; and 

5 (B) support an equitable transition to a 

6 zero financed emissions economy. 

7 (d) COLLECTION OF DATA.—The Board of Governors 

8 of the Federal Reserve System shall collect such data as 

9 needed from bank holding companies to carry out the re10 ports required under this section. 

Æ 


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