Sponsors (8)
The bill aims to reduce systemic climate risk by standardizing science-based stress tests, scenario planning, and transparency across financial firms, but it also creates new compliance, reporting, and potential capital requirements that could raise costs, tighten credit, and expand regulatory discretion—improving resilience at the potential expense of higher near-term economic and administrative burdens.
Taxpayers and the broader financial system face lower systemic climate-related risk because banks and large financial firms will run standardized, science-based climate stress tests and capital shortfall assessments, improving resilience to climate-driven losses.
Large banks and covered financial firms get clearer, standardized rules, definitions, and coordinated guidance (including named climate science leads) which reduces legal/regulatory uncertainty and improves consistency across supervisors and firms.
Businesses, utilities, and state/local governments will gain common climate risk scenarios and analytic tools that help with infrastructure, supply-chain, and energy planning, lowering future physical-damage and outage risks.
Banks and large financial firms will face substantial new compliance, reporting, and modeling costs to run climate stress tests and surveys, costs that are likely to be passed through to customers and taxpayers.
If stress tests lead to higher required capital or tighter supervisory expectations, borrowing costs could rise and credit availability could tighten for households and small businesses.
Tighter focus on transition risks and potential classification of climate risks as systemic may accelerate shifts away from fossil-fuel-dependent sectors, causing economic disruption and job losses in energy communities.
Based on analysis of 7 sections of legislative text.
Mandates Fed‑developed climate scenarios and biennial climate stress tests for the largest banks/financial firms and confidential resilience surveys of other large supervised firms.
Official title: Require the Board of Governors of the Federal Reserve System, in consultation with the heads of other relevant Federal agencies, to develop and conduct financial risk analyses relating to climate change, and for other purposes.
Introduced April 10, 2025 by Brian Emanuel Schatz · Last progress April 10, 2025
Requires the Federal Reserve to develop standardized climate risk scenarios (1.5°C, 2.0°C, and a policy‑based projection) and to run biennial climate‑related stress tests of very large bank holding companies and large nonbank financial companies. Establishes a 10‑member technical development group of climate scientists and economists to advise scenario design, and directs the Fed to run confidential surveys of other large supervised firms about exposures and planned adaptations, with public aggregate summaries.