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Amends section 165(i)(1) of the Financial Stability Act of 2010 by inserting text into subparagraph (B)(i) and by adding a new subparagraph (C) that establishes definitions and requires biennial climate-related capital adequacy analyses for covered entities.
Provides that Chapter 10 of Title 5, United States Code, shall not apply with respect to the Climate Risk Scenario Technical Development Group.
Requires the Federal Reserve Board, working with other banking regulators and designated climate science leads, to develop standardized climate-change risk scenarios and use them to run regular climate-related stress tests and surveys of large banks and significant nonbank financial firms. The law creates a 10-member technical advisory group of climate scientists and economists to design scenarios and advise on methodology, and it mandates public reporting while protecting respondent confidentiality. Covered firms must undergo biennial climate capital adequacy tests using scenario-based adverse-condition analyses; the Fed must produce three initial scenarios within one year (including a 1.5°C and 2°C pathway). Regulators will also run a recurring survey to gauge firms’ readiness and adaptation plans, with public summaries of results and updates as science evolves.
2024 was the warmest year on record globally and the first calendar year that the average global temperature exceeded 1.5 degrees Celsius above pre-industrial levels.
If current trends continue, average global temperatures over the long term are likely to surpass 1.5 degrees Celsius above pre-industrial levels between 2030 and 2050.
Global temperature rise has already resulted in more heavy rainstorms, coastal flooding, heat waves, hurricanes, wildfires, and other extreme events.
Since 1980, the number of extreme weather events per year that cost the people of the United States more than $1,000,000,000 per event, accounting for inflation, has increased significantly.
Since 1980, the total cost of extreme weather events in the United States has exceeded $2,915,000,000,000.
Primary direct effects fall on large financial firms: bank holding companies, major banks, insurers, broker-dealers, and significant nonbank financial companies subject to supervision. These firms will need to implement scenario-based modeling, provide data for surveys, and may face supervisory findings about capital adequacy under climate-related adverse conditions. Expect increased compliance costs for modeling, data collection, and governance (hiring or contracting climate-modeling expertise). Regulators (Federal Reserve, OCC, FDIC and other primary regulators) will gain standardized tools and public reporting to assess systemic exposure to both physical risks (extreme weather, sea-level rise, chronic temperature changes) and transition risks (policy shifts, market repricing, technological change).
For markets and consumers, improved disclosure and stress testing aim to reduce systemic shock risk and improve resilience, but the law could also lead to supervisory actions that change firms’ capital requirements or business practices, potentially affecting credit supply or pricing. The Technical Development Group and climate science leads create new engagement opportunities for climate scientists and economists; their public materials may set industry expectations for scenario design and risk modeling. Overall, benefits include better-informed supervision and potentially stronger financial-system resilience; tradeoffs include compliance costs, model uncertainty, and possible disputes over scenario design and supervisory outcomes.
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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.
Introduced April 10, 2025 by Sean Casten · Last progress April 10, 2025
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.
Introduced in House