[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 1138 Introduced in Senate (IS)]
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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.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Fossil Free Finance Act of 2023''.
SEC. 2. ALIGNMENT OF FINANCED EMISSIONS WITH SCIENCE-BASED TARGETS.
The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is
amended by adding at the end the following:
``SEC. 15. ALIGNMENT OF FINANCED EMISSIONS WITH SCIENCE-BASED TARGETS.
``(a) Definitions.--In this section:
``(1) Carbon offsets--The term `carbon offsets' means an
emissions reduction or removal of greenhouse gases in a manner
calculated and traced for the purpose of offsetting an entity's
greenhouse gas emissions.
``(2) Covered bank holding company.--The term `covered bank
holding company' means a bank holding company with total
consolidated assets not less than $50,000,000,000.
``(3) Deforestation risk commodities.--The term
`deforestation risk commodities' means globally traded goods
and raw materials--
``(A) that originate from natural forest
ecosystems--
``(i) directly from within forest areas; or
``(ii) from areas previously under forest
cover; and
``(B) the extraction or production of which
contributes significantly to the conversion of natural
forest to agriculture, tree plantation, or other
nonforest land use.
``(4) Financed emissions.--The term `financed emissions'
means, with respect to a covered bank holding company, and any
nonbank financial company supervised by the Board in accordance
with section 113 of the Financial Stability Act of 2010 (12
U.S.C. 5323), the greenhouse gas emissions of such company,
expressed in metric tons of carbon dioxide equivalent,
attributable to investment in, or the providing of financial
services to, another company or project of another company,
including--
``(A) investments in a debt or equity investment in
such another company or the assets of such another
company;
``(B) project finance investment;
``(C) underwriting;
``(D) syndication or securitization of loans or
asset-backed securities;
``(E) derivative transactions related to financing
or hedging; and
``(F) market making.
``(5) Fossil fuel financing.--The term `fossil fuel
financing' means, with respect to a covered bank holding
company, investment in--
``(A) a company that derives not less than 15
percent revenue from exploration, extraction,
processing, exporting, transporting, and any other
significant action with respect to oil, natural gas,
coal, or any byproduct thereof; or
``(B) a fossil fuel project.
``(6) Fossil fuel project.--The term `fossil fuel project'
means a project intended to--
``(A) facilitate or expand exploration, extraction,
processing, exporting, transporting, or any other
significant action with respect to oil, natural gas,
coal; or
``(B) construct any infrastructure related to the
activities described in subparagraph (A), such as
wells, pipelines, terminals, refineries, or utility-
sale generation facilities.
``(7) Greenhouse gas.--The term `greenhouse gas' means
carbon dioxide, methane, nitrous oxide, nitrogen trifluoride,
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.
``(8) Natural forest.--The term `natural forest' means a
natural arboreal ecosystem that--
``(A) has a species composition a significant
percentage of which is native species; and
``(B) contains a tree canopy cover of more than 10
percent over an area of not less than 0.5 hectares.
``(9) New or expanded fossil fuel project.--The term `new
or expanded fossil fuel project' means a fossil fuel project
that would increase the--
``(A) level of proven or developable oil, natural
gas, or coal reserves;
``(B) midstream throughput of pipelines, terminals,
or refineries; or
``(C) combustion of oil, natural gas, or coal for
utility-scale electricity generation.
``(b) Requirements.--Not later than 210 days after the date of
enactment of this section, and not less than once every 2 years
thereafter, a covered bank holding company shall--
``(1) submit to the Board an emission reduction plan for
reducing emissions in accordance with this section; and
``(2) if the plan is accepted under subsection (d),
implement such plan.
``(c) Elements of Plan.--Each plan required under subsection
(b)(1)--
``(1) shall include--
``(A) a plan for the covered bank holding company
to reach zero financed emissions not later than January
1, 2050;
``(B) a plan to reduce the financed emissions of
the bank holding company by 50 percent not later than
January 1, 2030;
``(C) a plan to discontinue new or expanded fossil
fuel projects not later than 60 days after the date of
enactment of this section;
``(D) a plan for the covered bank holding company
to discontinue thermal coal financing not later than
January 1, 2025;
``(E) a plan for the covered bank holding company
to discontinue all fossil fuel financing not later than
January 1, 2030;
``(F) a plan for the covered bank holding company
to eliminate financing of deforestation risk
commodities; and
``(G) such other requirements as the Board
determines is necessary to protect the financial
stability of the United States;
``(2) may not include carbon offsets;
``(3) may include proven negative carbon emission
technologies to meet the requirements under paragraph (1)(A) if
the technologies do not negatively impact low-income, minority,
or indigenous communities;
``(4) shall prioritize--
``(A) the covered bank holding company withdrawing
funding from companies and projects that have a
disproportionately negative impact on the health and
well-being of low-income and minority communities;
``(B) lending to companies for purposes of carrying
out severance, retraining, and other benefits to
workers impacted by the transition to zero financed
emissions; and
``(C) enhanced due diligence about the impacts of
financing on biodiversity and community and the
framework of the client for and track record in--
``(i) managing greenhouse gas and other
emissions; and
``(ii) compliance with regulations and
international standards.
``(d) Consideration of Plan.--Not later than 180 days after the
date on which the Board receives a plan submitted under subsection
(b)(1), the Board shall--
``(1) accept the plan; or
``(2)(A) reject the plan if the plan does not align with
science-based targets without the use of offsets or unproven
carbon emission reduction technologies; and
``(B) require the covered bank holding company to revise
such plan in accordance with the suggestions of the Board.
``(e) Penalties.--If a covered bank holding company does not submit
a plan in accordance with this section or meet the requirements set out
in such a plan--
``(1) the Board shall--
``(A) apply the penalties under section 8 under
regulations prescribed by the Board;
``(B) require divestiture of assets in order to
bring the financed emissions of a covered bank holding
company into compliance with the requirements set out
in such a plan; and
``(C) notify the Board of Directors of the Federal
Deposit Insurance Corporation of the noncompliance of
the covered bank holding company; and
``(2) the Board of Directors of the Federal Deposit
Insurance Corporation may, with respect to any covered bank
holding company described in paragraph (1)(C) or a subsidiary
of the bank holding company that contributes to the failure of
the covered bank holding company to comply with this section--
``(A) terminate the insured status of the insured
depository institution of which the bank holding
company has control under section 8(a)(2) of the
Federal Deposit Insurance Act (12 U.S.C. 1818(a)(2));
and
``(B) carry out any other corrective action
available under section 38 of the Federal Deposit
Insurance Act (12 U.S.C. 1831o) for the insured
depository institution of which the bank holding
company has control under section 8(a)(2) of the
Federal Deposit Insurance Act (12 U.S.C. 1818(a)(2)).
``(f) Regulations.--Not later than 180 days after the date of
enactment of this section, the Board shall issue regulations
establishing the format and timing for submission of the plans required
under this section.''.
SEC. 3. CONTRIBUTION TO CLIMATE CHANGE INCLUDED IN FSOC DESIGNATION.
(a) Authority To Require Supervision and Regulation of Certain
Nonbank Financial Companies.--Section 113 of the Financial Stability
Act of 2010 (12 U.S.C. 5323) is amended--
(1) in subsection (a)(2)--
(A) in subparagraph (J), by striking ``and'' at the
end;
(B) by redesignating subparagraph (K) as
subparagraph (L); and
(C) by inserting after subparagraph (J) the
following:
``(K) the extent to which the company makes a
nontrivial contribution to the financed emissions, as
defined in section 15 of the Bank Holding Company Act
of 1956, of the financial system of the United States;
and''; and
(2) in subsection (b)(2)--
(A) in subparagraph (J), by striking ``and'' at the
end;
(B) by redesignating subparagraph (K) as
subparagraph (L); and
(C) by inserting after subparagraph (J) the
following:
``(K) the extent to which the company makes a
nontrivial contribution to the financed emissions, as
defined in section 15 of the Bank Holding Company Act
of 1956, of the financial system of the United States;
and''.
(b) Enhanced Supervision and Prudential Standards for Nonbank
Financial Companies Supervised by the Board of Governors and Certain
Bank Holding Companies.--
(1) Development of prudential standards.--Section 115(b)(1)
of the Financial Stability Act of 2010 (12 U.S.C. 5325(b)(1))
is amended--
(A) in subparagraph (H), by striking ``and'';
(B) in subparagraph (I), by striking the period at
the end and inserting ``; and''; and
(C) by adding at the end the following:
``(J) divestiture of financed emissions, as defined
in section 15 of the Bank Holding Company Act of
1956.''.
(2) Required standards.--Section 165(b)(1)(A) of the
Financial Stability Act of 2010 (12 U.S.C. 5365(b)(1)(A)) is
amended--
(A) in clause (iv), by striking ``and'' at the end;
(B) in clause (v), by striking the period and
inserting ``; and''; and
(C) by adding at the end the following:
``(vi) emissions reduction plans in
accordance with section 15 of the Bank Holding
Company Act of 1956.''.
SEC. 4. REPORTS.
(a) Definitions.--In this section:
(1) Covered bank holding company; financed emissions.--The
terms ``covered bank holding company'' and ``financed
emissions'' have the meanings given the terms in section 15 of
the Bank Holding Company Act of 1956, as added by section 2 of
this Act.
(2) Science-based emissions targets.--The term ``science-
based emissions targets'' means reduction in greenhouse gas
emissions consistent with preventing an increase in global
average temperature of not less than 1.5 degrees Celsius
compared to pre-industrial levels.
(b) Initial Report.--Not later than 180 days after the date of
enactment of this Act, the Board of Governors of the Federal Reserve
System shall submit to Congress a report that--
(1) identifies the current level of financed emissions in
the financial system of the United States;
(2) includes an analysis of trends in financed emissions
reductions;
(3) includes a summary of the commitments of covered bank
holding companies to reduce financed emissions;
(4) estimates the financed emissions in the financial
system of the United States needed to meet science-based
emissions targets;
(5) identifies regulatory gaps in reducing financed
emissions that cannot be addressed with authorities of the
Board and recommendations for addressing such gaps;
(6) identifies data quality challenges for assessing
financed emissions and recommendations to address those
challenges;
(7) identifies the equitable transition needs for workers
and communities that will be impacted by a shift to a zero
financed emissions economy;
(8) analyzes--
(A) the number and groups of people affected by a
transition to zero financed emissions; and
(B) the economic impact of such a transition with
respect to such groups; and
(9) identifies regulatory and legislative options for
mitigating the economic impacts described in paragraph (8)(B),
including--
(A) the use of existing authorities, including the
Community Reinvestment Act of 1977 (12 U.S.C. 2901 et
seq.) and emergency lending powers under section 13 of
the Federal Reserve Act (12 U.S.C. 342); and
(B) the establishment of a public investment bank
to finance investment in an equitable transition to a
zero financed emissions economy.
(c) Periodic Report.--Not later than 180 days after the date of
enactment of this Act, and not less than once every 2 years thereafter,
the Board of Governors of the Federal Reserve System shall submit to
Congress a report that includes--
(1) an analysis of the progress against aligning with
financed emissions targets;
(2) the estimates described in subsection (b)(4);
(3) an analysis of the progress made in the preceding 2
years toward an equitable transition to a zero financed
emissions economy; and
(4) recommendations with respect to assistance Congress and
Federal agencies may provide to--
(A) facilitate a reduction of financed emissions;
and
(B) support an equitable transition to a zero
financed emissions economy.
(d) Collection of Data.--The Board of Governors of the Federal
Reserve System shall collect such data as needed from bank holding
companies to carry out the reports required under this section.
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