Climate Change Financial Risk Act of 2025
Climate Change Financial Risk Act of 2025
Plain Language Summary
# Climate Change Financial Risk Act of 2025 - Summary **What the bill would do:** This bill requires the Federal Reserve to assess whether large banks and financial companies have enough financial reserves to survive losses caused by climate change. Every two years, major financial institutions would undergo stress tests examining how they'd fare under different climate change scenarios (like increased flooding, drought, or extreme weather). If these tests show vulnerabilities, companies must submit plans explaining how they'll strengthen their finances to handle climate risks. If their plans aren't approved, the Federal Reserve can restrict how much money these companies can distribute to shareholders. **Who it affects:** The bill primarily targets large banks and major nonbank financial companies—essentially the institutions that manage trillions of dollars in investments and mortgages.
Indirectly, it could affect everyday Americans by potentially influencing how financial institutions manage risk and make lending decisions. The bill also establishes a technical advisory group to help develop climate risk testing standards. **Current status:** The bill is currently in committee (S 1471, 119th Congress), meaning it hasn't yet been voted on by the full Senate. It was introduced by Senator Brian Schatz (D-Hawaii).
CRS Official Summary
Climate Change Financial Risk Act of 2025This bill addresses climate change risk and its potential impact on the financial system.The Federal Reserve Board must develop financial risk analyses relating to climate change for certain large nonbank financial companies and bank holding companies. Specifically, these entities must be evaluated every two years on whether they have the capital necessary to absorb financial losses that would arise under several different climate change risk scenarios. In response to the results of the evaluation, entities must develop and submit for approval a climate risk resolution plan. The plan must include a capital policy with respect to climate risk planning and targets to remedy identified vulnerabilities. If the plan is not approved, the entity’s ability to make capital distributions is restricted. The bill also establishes the Climate Risk Scenario Technical Development Group to provide recommendations to the board regarding climate change risk scenarios, and determine the financial and economic risks of these scenarios.The board must develop a survey to assess (1) the ability of other large financial institutions to withstand each scenario, (2) which surveyed entities have activities in geographical areas or industries that are significantly exposed to the impacts of climate change, and (3) how these surveyed entities plan to adapt to risks presented in each scenario.
Latest Action
Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.