What does Preamble of S 1471 do?

This bill mandates the Board of Governors of the Federal Reserve System to develop and conduct financial risk analyses related to climate change. The analyses must be conducted in consultation with the heads of other relevant Federal agencies. The bill's stated purpose is to address financial risks associated with climate change and includes 'other purposes'.

What does SHORT TITLE. of S 1471 do?

This bill is formally titled the Climate Change Financial Risk Act of 2025.

What does SENSE OF CONGRESS. of S 1471 do?

This section expresses the sense of Congress regarding climate change and its impacts on the U.S. economy and financial system. It notes that 2024 was the warmest year on record and that global temperatures are likely to surpass 1.5 degrees Celsius above pre-industrial levels within the next few decades. The text highlights the increasing frequency and cost of extreme weather events in the United States since 1980. It identifies climate-related economic risks, disruptions to energy and transportation systems, and potential impacts on labor productivity, food production, and coastal infrastructure. The section emphasizes the risks climate change poses to the financial services industry, including credit, counterparty, and market risks. It states that current stress tests conducted by the Board of Governors do not adequately reflect climate-related risks. The Board of Governors is encouraged to develop new analytical tools to assess and manage these risks, and to take action to strengthen the financial system's resilience to climate-related shocks.

What does DEFINITIONS. of S 1471 do?

This section defines terms used throughout the Act. “Bank holding company” is defined by reference to section 102(a) of the Financial Stability Act of 2010. “Climate science leads” includes specific federal agency administrators and officials. “Covered entity” refers to nonbank financial companies and bank holding companies meeting certain asset thresholds, or those deemed appropriate by the Board of Governors. “Nonbank financial company” is defined by reference to section 102(a)(4)(C) of the Financial Stability Act of 2010. “Physical risks” are financial risks resulting from climate-related effects, such as increased temperatures and extreme weather. “Surveyed entity” refers to entities supervised by federal agencies with assets of at least $10 billion, excluding covered entities. “Technical Development Group” refers to the group established under section 4(a). “Transition risks” are financial risks associated with climate change mitigation and adaptation efforts. “Value chain” encompasses the lifecycle of a product or service, including sourcing, production, and disposal.

What does CLIMATE RISK SCENARIO TECHNICAL DEVELOPMENT GROUP. of S 1471 do?

The Board of Governors is required to establish a Climate Risk Scenario Technical Development Group. The group will consist of 10 members: 5 climate scientists and 5 economists. The Technical Development Group will provide recommendations to the Board of Governors regarding climate change risk scenarios. The group will determine financial and economic risks resulting from established climate change risk scenarios. The group's final work products and supporting information must be publicly available. The group will provide technical assistance to covered entities and publicly available resources to other entities for assessing physical and transition risks. Members of the group will serve without pay. Chapter 10 of Title 5, United States Code, does not apply to the Technical Development Group.

What does DEVELOPMENT AND UPDATING OF CLIMATE CHANGE RISK SCENARIOS. of S 1471 do?

This section requires the Board of Governors to develop three climate change risk scenarios within one year of the Act's enactment. The scenarios must assume global temperature increases of 1.5 and 2 degrees Celsius above pre-industrial levels. A third scenario should reflect the likely average temperature increase considering implemented national climate policies, without factoring in unfulfilled commitments. The Board of Governors is directed to consider international banking supervisors' analytical tools and best practices for scenario analysis. The Technical Development Group can recommend updates to the temperature increases if they are deemed scientifically invalid. The scenarios must account for physical and transition risks impacting business operations globally, including disruptions to sourcing, production, transportation, and disposal. Considerations include changes in raw material prices, agricultural production, asset values, labor productivity, credit availability, and potential impacts from mass migration, conflict, and macroeconomic conditions.

What does CLIMATE-RELATED ENHANCED SUPERVISION FOR CERTAIN NONBANK of S 1471 do?

This section amends the Financial Stability Act of 2010 to establish biennial tests for certain nonbank financial companies and bank holding companies. The Board of Governors, in coordination with other agencies and climate science leads, will conduct these analyses to evaluate whether covered entities have sufficient capital to absorb losses from climate change risks. These analyses will use climate change risk scenarios developed under the Climate Change Financial Risk Act of 2025. For the first three analyses, covered entities will not face adverse consequences, and the Board of Governors will publicly release summaries and submit results to relevant congressional committees. Beginning with the fourth analysis, covered entities must submit a 'climate risk resolution plan' to the Board of Governors, based on prior analysis results. The climate risk resolution plan must include a capital policy and targets for addressing vulnerabilities identified in previous analyses. The Board of Governors can reject a climate risk resolution plan if it determines the plan is unreasonable, does not maintain capital ratios, or otherwise constitutes an unsafe or unsound practice. If the Board objects to a plan, the covered entity is restricted from making capital distributions, except for those arising from regulatory capital instruments.

What does SUB-SYSTEMIC EXPLORATORY SURVEY. of S 1471 do?

This section establishes a Sub-Systemic Exploratory Survey to assess the ability of surveyed entities to withstand climate risks. The survey will evaluate entities' exposure to climate change impacts and their plans to adapt business models and capital planning. The Board of Governors, in consultation with the Comptroller of the Currency and the Federal Deposit Insurance Corporation, is responsible for developing and administering the survey. The initial survey must be administered within one year of the completion of a prior analysis under the Financial Stability Act of 2010. A report summarizing the survey results and analyzing the plausibility and effectiveness of planned actions will be publicly released within 18 months of survey completion. The survey will be readministered biennially, with subsequent reports released within 180 days of completion. The Board of Governors may not identify individual surveyed entities in any report released. This section clarifies that survey participation does not preclude enforcement actions based on independent examinations.

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Climate Change Financial Risk Act of 2025 — S. 1471

Last updated: 4/10/2025 · Introduced: 4/10/2025

Author: Brian Schatz (D-HI)

TL;DR (AI)

The bill requires the Federal Reserve to develop and conduct financial risk analyses related to climate change, consulting with other federal agencies.
It establishes a Climate Risk Scenario Technical Development Group composed of climate scientists and economists to recommend climate change risk scenarios and provide technical assistance.
The Federal Reserve must develop three climate change risk scenarios, considering global temperature increases of 1.5 and 2 degrees Celsius, and incorporating physical and transition risks.
Certain nonbank financial companies and bank holding companies will undergo biennial climate-related enhanced supervision, using the developed scenarios to assess capital adequacy and potentially requiring climate risk resolution plans.
A Sub-Systemic Exploratory Survey will assess the ability of financial institutions with over $10 billion in assets to withstand climate risks and adapt their business models.

119th Congressin committeeHR. 2823(In Committee)Official page

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Includes provisions on preamble, short title., and 6 more.

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