[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 3481 Introduced in Senate (IS)]

<DOC>






115th CONGRESS
  2d Session
                                S. 3481

  To amend the Securities Exchange Act of 1934 to require issuers to 
 disclose certain activities relating to climate change, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           September 24, 2018

 Ms. Warren (for herself, Mr. Whitehouse, Mr. Schatz, Mr. Markey, Mr. 
 Booker, Mr. Merkley, Ms. Harris, and Mrs. Gillibrand) introduced the 
 following bill; which was read twice and referred to the Committee on 
                  Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
  To amend the Securities Exchange Act of 1934 to require issuers to 
 disclose certain activities relating to climate change, 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 ``Climate Risk Disclosure Act of 
2018''.

SEC. 2. DEFINITIONS.

    In this Act--
            (1) the term ``appropriate climate principals'' means--
                    (A) the Administrator of the Environmental 
                Protection Agency;
                    (B) the Secretary of Energy;
                    (C) the Administrator of the National Oceanic and 
                Atmospheric Administration;
                    (D) the Director of the Office of Management and 
                Budget; and
                    (E) the head of any other Federal agency determined 
                appropriate by the Commission;
            (2) the term ``appropriate congressional committees'' 
        means--
                    (A) the Committee on Banking, Housing, and Urban 
                Affairs of the Senate; and
                    (B) the Committee on Financial Services of the 
                House of Representatives;
            (3) the term ``climate change'' means a change of climate 
        that is--
                    (A) attributed directly or indirectly to human 
                activity that alters the composition of the global 
                atmosphere; and
                    (B) in addition to natural climate variability 
                observed over comparable time periods;
            (4) the term ``Commission'' means the Securities and 
        Exchange Commission; and
            (5) the term ``covered issuer'' has the meaning given the 
        term in subsection (s)(1) of section 13 of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78m), as added by section 4(a).

SEC. 3. SENSE OF CONGRESS.

    It is the sense of Congress that--
            (1) continued inaction in addressing climate change poses a 
        significant threat to the growth and stability of the economy 
        of the United States;
            (2) many sectors of the economy of the United States are 
        exposed to multiple channels of climate-related risk, which may 
        include exposure to--
                    (A) the physical impacts of climate change, 
                including the rise of the average global temperature, 
                sea-level rise, desertification, ocean acidification, 
                flooding, drought, and wildfires;
                    (B) the economic disruptions and security threats 
                that result from the physical impacts described in 
                subparagraph (A); and
                    (C) the transition impacts that result as the 
                global economy transitions to a clean energy, low-
                emissions economy, including financial impacts as 
                fossil fuel assets become stranded as the global 
                community acts to prevent the worst impacts of climate 
                change by keeping the average rise in global 
                temperature well below 2 degrees Celsius above pre-
                industrial levels;
            (3) assessing the potential impact of climate-related risks 
        on national and international financial systems is an urgent 
        concern;
            (4) companies have a duty to disclose financial risks that 
        climate change presents;
            (5) the Commission has a duty to promote a risk-informed 
        securities market that is worthy of the trust of the public as 
        families invest for their futures;
            (6) including standardized climate change risk disclosure 
        that is useful for decision makers in annual reports to the 
        Commission will increase transparency with respect to risk 
        accumulation and exposure in financial markets;
            (7) requiring companies to disclose climate-related risk 
        exposure and risk management strategies will encourage a smooth 
        transition to a clean energy, low-emissions economy and guide 
        capital allocation to mitigate, and adapt to, the effects of 
        climate change; and
            (8) a critical component in fighting climate change is a 
        transparent accounting of the risks that climate change 
        presents and the implications of continued inaction with 
        respect to climate change.

SEC. 4. DISCLOSURE.

    (a) In General.--Section 13 of the Securities Exchange Act of 1934 
(15 U.S.C. 78m) is amended by adding at the end the following:
    ``(s) Disclosures Relating to Climate Change.--
            ``(1) Definitions.--In this subsection--
                    ``(A) the term `2 degrees or lower scenario' means 
                a widely recognized, publicly available analysis 
                scenario in which human interventions to combat global 
                climate change are likely to prevent the global average 
                temperature from reaching 2 degrees Celsius above pre-
                industrial levels;
                    ``(B) the terms `appropriate climate principals' 
                and `climate change' have the meanings given those 
                terms in section 2 of the Climate Risk Disclosure Act 
                of 2018;
                    ``(C) the term `baseline scenario' means a widely 
                recognized analysis scenario in which levels of 
                greenhouse gas emissions, as of the date on which the 
                analysis is performed, continue to grow, resulting in--
                            ``(i) an increase in the global average 
                        temperature of 2 degrees Celsius or more above 
                        pre-industrial levels; and
                            ``(ii) the realization of physical risks 
                        relating to global climate change;
                    ``(D) the term `carbon dioxide equivalent' means 
                the quantity of a greenhouse gas that has a global 
                warming potential equivalent to 1 metric ton of carbon 
                dioxide, as determined under table A-1 of subpart A of 
                part 98 of title 40, Code of Federal Regulations, as in 
                effect on the date of enactment of this subsection;
                    ``(E) the term `commercial development of fossil 
                fuels' includes--
                            ``(i) exploration, extraction, processing, 
                        exporting, transporting, and any other 
                        significant action with respect to oil, natural 
                        gas, or coal; and
                            ``(ii) acquiring a license for any activity 
                        described in clause (i);
                    ``(F) the term `covered issuer' means an issuer 
                that is required to file an annual report under 
                subsection (a) or section 15(d);
                    ``(G) the term `direct and indirect greenhouse gas 
                emissions' includes, with respect to a covered issuer--
                            ``(i) all direct greenhouse gas emissions 
                        released by the covered issuer;
                            ``(ii) all indirect greenhouse gas 
                        emissions with respect to electricity, heat, or 
                        steam purchased by the covered issuer;
                            ``(iii) significant indirect emissions, 
                        other than the emissions described in clause 
                        (ii), that occur in the value chain of the 
                        covered issuer; and
                            ``(iv) all indirect greenhouse gas 
                        emissions that are attributable to assets owned 
                        or managed, including assets that are partially 
                        owned or managed, by the covered issuer;
                    ``(H) the term `fossil fuel reserves' means all 
                producing assets, proved reserves, unproved resources, 
                and any other ownership stake in sources of fossil 
                fuels;
                    ``(I) the term `greenhouse gas'--
                            ``(i) means carbon dioxide, 
                        hydrofluorocarbons, methane, nitrous oxide, 
                        perfluorocarbons, and sulfur hexafluoride; and
                            ``(ii) includes any other anthropogenically 
                        emitted gas or particulate that the 
                        Administrator of the Environmental Protection 
                        Agency determines, after notice and comment, to 
                        contribute to global warming;
                    ``(J) the term `greenhouse gas emissions' means the 
                emissions of greenhouse gas, expressed in terms of 
                metric tons of carbon dioxide equivalent;
                    ``(K) the term `physical risks' means financial 
                risks to long-lived fixed assets, locations, 
                operations, or value chains that result from exposure 
                to physical climate-related effects, including--
                            ``(i) increased average global 
                        temperatures;
                            ``(ii) increased severity and frequency of 
                        extreme weather events;
                            ``(iii) increased flooding;
                            ``(iv) sea level rise;
                            ``(v) ocean acidification;
                            ``(vi) increased frequency of wildfires;
                            ``(vii) decreased arability of farmland; 
                        and
                            ``(viii) decreased availability of fresh 
                        water;
                    ``(L) the term `social cost of carbon' means the 
                monetized present value, discounted at a 3 percent or 
                lower discount rate, in dollars, per metric ton of 
                carbon dioxide (or carbon dioxide equivalent), of the 
                net global costs over 300 years caused by the emission 
                of carbon dioxide (or carbon dioxide equivalent, as 
                applicable) that result from--
                            ``(i) changes in net agricultural 
                        productivity;
                            ``(ii) decreases in capital and labor 
                        productivity;
                            ``(iii) effects on human health;
                            ``(iv) property damage from increased sea 
                        level rise, flooding, wildfires, and frequency 
                        and severity of extreme weather events;
                            ``(v) the value of ecosystem services; and
                            ``(vi) any other type of economic, social, 
                        political, or natural disruption;
                    ``(M) the term `transition risks' means financial 
                risks that are attributable to climate change 
                mitigation and adaptation, including efforts to reduce 
                greenhouse gas emissions and strengthen resilience to 
                the impacts of climate change, including--
                            ``(i) costs relating to--
                                    ``(I) international treaties and 
                                agreements;
                                    ``(II) Federal, State, and local 
                                policy;
                                    ``(III) new technologies;
                                    ``(IV) changing markets;
                                    ``(V) reputational impacts relevant 
                                to changing consumer behavior; and
                                    ``(VI) litigation; and
                            ``(ii) assets that may lose value or become 
                        stranded due to any of the costs described in 
                        subclauses (I) through (VI) of clause (i); and
                    ``(N) the term `value chain'--
                            ``(i) means the total lifecycle of a 
                        product or service, both before and after 
                        production of the product or service, as 
                        applicable; and
                            ``(ii) may include the sourcing of 
                        materials, production, and disposal with 
                        respect to the product or service described in 
                        clause (i).
            ``(2) Findings.--Congress finds that--
                    ``(A) long-term financial and economic risks and 
                opportunities relating to climate change, and the 
                national and global reduction of greenhouse gas 
                emissions, constitute information that issuers--
                            ``(i) may reasonably expect to affect 
                        shareholder decisionmaking; and
                            ``(ii) should regularly identify, evaluate, 
                        and disclose; and
                    ``(B) the disclosure of information described in 
                subparagraph (A) should--
                            ``(i) identify, and evaluate the potential 
                        financial impact of, physical risks and 
                        transition risks posed by climate change;
                            ``(ii) allow for intra- and cross-industry 
                        comparison, to the extent practicable, of 
                        climate-related risk exposure through the 
                        inclusion of standardized industry-specific and 
                        sector-specific disclosure metrics, as 
                        identified by the Commission, in consultation 
                        with the appropriate climate principals;
                            ``(iii) allow for tracking of performance 
                        over time with respect to mitigating climate 
                        risk exposure; and
                            ``(iv) incorporate a price on greenhouse 
                        gas emissions in financial analyses that 
                        reflects, at minimum, the social cost of carbon 
                        that is attributable to issuers.
            ``(3) Disclosure.--Each covered issuer, in any annual 
        report filed by the covered issuer under subsection (a) or 
        section 15(d), shall, in accordance with the requirements 
        established under paragraphs (4) and (5), include in each such 
        report information regarding--
                    ``(A) the identification of, the evaluation of 
                potential financial impacts of, and any risk-management 
                strategies relating to--
                            ``(i) physical risks posed to the covered 
                        issuer by climate change; and
                            ``(ii) transition risks posed to the 
                        covered issuer by climate change; and
                    ``(B) a description of any established corporate 
                governance processes and structures to identify, 
                assess, and manage climate-related risks.
            ``(4) Requirements.--
                    ``(A) In general.--The Commission, in consultation 
                with the appropriate climate principals, and consistent 
                with subparagraph (B), shall issue final rules with 
                respect to the information that a covered issuer is 
                required to disclose under paragraph (3).
                    ``(B) Contents.--In issuing the final rules 
                required under subparagraph (A), the Commission shall--
                            ``(i) establish, in consultation with the 
                        appropriate climate principals, climate-related 
                        risk disclosure metrics and guidance, which 
                        shall--
                                    ``(I) be, to the extent 
                                practicable, specialized for industries 
                                within specific sectors of the economy, 
                                which shall include--
                                            ``(aa) the sectors of 
                                        finance, insurance, 
                                        transportation, electric power, 
                                        and non-renewable energy; and
                                            ``(bb) any other sector 
                                        determined appropriate by the 
                                        Commission, in consultation 
                                        with the appropriate climate 
                                        principals;
                                    ``(II) include reporting standards 
                                for estimating and disclosing direct 
                                and indirect greenhouse gas emissions 
                                by a covered issuer, and any affiliates 
                                of the covered issuer, which shall--
                                            ``(aa) separate, to the 
                                        extent practicable, total 
                                        emissions of each specified 
                                        greenhouse gas by the covered 
                                        issuer; and
                                            ``(bb) include greenhouse 
                                        gas emissions by the covered 
                                        issuer during the period 
                                        covered by the disclosure;
                                    ``(III) include reporting standards 
                                and metrics for disclosing, with 
                                respect to a covered issuer--
                                            ``(aa) the total amount of 
                                        fossil fuel-related assets 
                                        owned or managed by the covered 
                                        issuer; and
                                            ``(bb) the percentage of 
                                        fossil fuel-related assets as a 
                                        percentage of total assets 
                                        owned or managed by the covered 
                                        issuer;
                                    ``(IV) establish a minimum social 
                                cost of carbon, which--
                                            ``(aa) shall be considered 
                                        a minimum price with respect to 
                                        costs associated with carbon 
                                        emissions; and
                                            ``(bb) a covered issuer 
                                        shall use in preparing climate-
                                        related disclosure statements;
                                    ``(V) not preclude a covered issuer 
                                from using and disclosing, as compared 
                                with the price established under 
                                subclause (IV)(aa), a higher price of 
                                greenhouse gas emissions;
                                    ``(VI) specify requirements for, 
                                and the disclosure of, input 
                                parameters, assumptions, and analytical 
                                choices to be used in climate scenario 
                                analyses required under clause (ii)(I), 
                                including--
                                            ``(aa) present value 
                                        discount rates;
                                            ``(bb) time frames to 
                                        consider, which shall be not 
                                        shorter than 30 years; and
                                            ``(cc) minimum pricing of 
                                        greenhouse gas emissions, as 
                                        established under subclause 
                                        (IV)(aa) and subject to 
                                        subclause (V); and
                                    ``(VII) include, after consultation 
                                with the Secretary of Energy, the 
                                Secretary of the Interior, and the 
                                Secretary of Transportation, 
                                documentation standards and guidance 
                                with respect to the information 
                                required under clause (ii)(III);
                            ``(ii) require that a covered issuer, with 
                        respect to the disclosure required under 
                        paragraph (3)--
                                    ``(I) incorporate into the 
                                disclosure--
                                            ``(aa) quantitative 
                                        analysis to support any 
                                        qualitative statement made by 
                                        the covered issuer;
                                            ``(bb) the metrics and 
                                        guidance established under 
                                        clause (i);
                                            ``(cc) industry-specific 
                                        metrics that comply with the 
                                        requirements under clause 
                                        (i)(I);
                                            ``(dd) a discussion of the 
                                        short-, medium-, and long-term 
                                        resilience of any risk 
                                        management strategy, and the 
                                        evolution of applicable risk 
                                        metrics, of the covered issuer 
                                        under each scenario described 
                                        in subclause (II); and
                                            ``(ee) the total social 
                                        cost of carbon emissions that 
                                        are attributable to the direct 
                                        and indirect greenhouse gas 
                                        emissions of the covered 
                                        issuer;
                                    ``(II) consider, when preparing any 
                                qualitative or quantitative risk 
                                analysis statement contained in the 
                                disclosure--
                                            ``(aa) a baseline scenario 
                                        that includes physical impacts 
                                        of climate change;
                                            ``(bb) a 2 degrees or lower 
                                        scenario; and
                                            ``(cc) any additional 
                                        climate analysis scenario 
                                        considered appropriate by the 
                                        Commission, in consultation 
                                        with the appropriate climate 
                                        principals;
                                    ``(III) if the covered issuer 
                                engages in the commercial development 
                                of fossil fuels, include in the 
                                disclosure--
                                            ``(aa) an estimate of the 
                                        amount of direct and indirect 
                                        greenhouse gas emissions of the 
                                        covered issuer that are 
                                        attributable to--

                                                    ``(AA) combustion;

                                                    ``(BB) flared 
                                                hydrocarbons;

                                                    ``(CC) process 
                                                emissions;

                                                    ``(DD) directly 
                                                vented emissions;

                                                    ``(EE) fugitive 
                                                emissions or leaks; and

                                                    ``(FF) land use 
                                                changes;

                                            ``(bb) a description of--

                                                    ``(AA) the 
                                                sensitivity of fossil 
                                                fuel reserve levels to 
                                                future price projection 
                                                scenarios that 
                                                incorporate the social 
                                                cost of carbon into 
                                                hydrocarbon pricing;

                                                    ``(BB) the 
                                                percentage of the 
                                                reserves of the covered 
                                                issuer that will be 
                                                developed under a 2 
                                                degrees or lower 
                                                scenario, as well as a 
                                                forecast for the 
                                                development prospects 
                                                of each reserve under a 
                                                2 degrees or lower 
                                                scenario;

                                                    ``(CC) the 
                                                potential amount of 
                                                direct and indirect 
                                                greenhouse gas 
                                                emissions that are 
                                                embedded in proved and 
                                                probable hydrocarbon 
                                                reserves, with each 
                                                such calculation 
                                                presented as a total 
                                                and in subdivided 
                                                categories by the type 
                                                of reserve;

                                                    ``(DD) the 
                                                methodology of the 
                                                covered issuer for 
                                                detecting and 
                                                mitigating fugitive 
                                                methane emissions, 
                                                which shall include the 
                                                frequency with which 
                                                applicable assets of 
                                                the covered issuer are 
                                                observed for methane 
                                                leaks, the processes 
                                                and technology that the 
                                                covered issuer uses to 
                                                detect methane leaks, 
                                                the percentage of 
                                                assets of the covered 
                                                issuer that the covered 
                                                issuer inspects under 
                                                that methodology, and 
                                                quantitative and time-
                                                bound reduction goals 
                                                of the issuer with 
                                                respect to methane 
                                                leaks;

                                                    ``(EE) the amount 
                                                of water that the 
                                                covered issuer 
                                                withdraws from 
                                                freshwater sources for 
                                                use in operations of 
                                                the covered issuer; and

                                                    ``(FF) the 
                                                percentage of the water 
                                                described in subitem 
                                                (EE) that comes from 
                                                regions of water stress 
                                                or that face wastewater 
                                                management challenges; 
                                                and

                                            ``(cc) any other 
                                        information that the 
                                        Commission, in consultation 
                                        with the appropriate climate 
                                        principals and the Secretary of 
                                        Energy, the Secretary of the 
                                        Interior, and the Secretary of 
                                        Transportation, determines is--

                                                    ``(AA) necessary;

                                                    ``(BB) appropriate 
                                                to safeguard the public 
                                                interest; or

                                                    ``(CC) directed at 
                                                ensuring that investors 
                                                are informed in 
                                                accordance with the 
                                                findings described in 
                                                paragraph (2)(B); and

                            ``(iii) with respect to the disclosure 
                        required under paragraph (3), require that the 
                        covered issuer include in the disclosure any 
                        other information, or use any climate-related 
                        or greenhouse gas emissions metric, that the 
                        Commission, in consultation with the 
                        appropriate climate principals, determines is--
                                    ``(I) necessary;
                                    ``(II) appropriate to safeguard the 
                                public interest; or
                                    ``(III) directed at ensuring that 
                                investors are informed in accordance 
                                with the findings described in 
                                paragraph (2)(B).
            ``(5) Formatting.--
                    ``(A) In general.--Any information included 
                pursuant to the requirements of this subsection by a 
                covered issuer in an annual report submitted under 
                subsection (a) or section 15(d) shall be submitted in 
                an interactive data format.
                    ``(B) Establishment by commission.--The Commission 
                shall develop standards for the interactive data format 
                described in subparagraph (A), which shall include 
                electronic tags for information that the Commission 
                determines is--
                            ``(i) necessary;
                            ``(ii) appropriate to safeguard the public 
                        interest; or
                            ``(iii) directed at ensuring that investors 
                        are informed in accordance with the findings 
                        described in paragraph (2)(B).
            ``(6) Public availability.--The Commission shall, to the 
        maximum extent practicable, make a compilation of the 
        information submitted by covered issuers under this subsection 
        publicly available on the website of the Commission.
            ``(7) Rule of construction.--Nothing in paragraph (3) or 
        (4) may be construed as precluding a covered issuer from 
        including, in an annual report submitted under subsection (a) 
        or section 15(d), any information not explicitly referenced in 
        those paragraphs.''.
    (b) Regulations.--
            (1) In general.--Not later than 1 year after the date of 
        enactment of this Act, the Commission, in consultation with the 
        appropriate climate principals, shall issue final rules to 
        establish appropriate documentation standards, metrics for 
        calculations required, and guidance with respect to the 
        disclosure requirements under subsection (s) of section 13 of 
        the Securities Exchange Act of 1934 (15 U.S.C. 78m), as added 
        by subsection (a) of this section.
            (2) Periodic updates.--The Commission shall periodically 
        update the rules issued under paragraph (1) to ensure that 
        those rules further the purposes described in subsection 
        (s)(2)(B) of section 13 of the Securities Exchange Act of 1934 
        (15 U.S.C. 78m), as added by subsection (a) of this section.

SEC. 5. REPORTS.

    (a) Securities and Exchange Commission.--The Commission shall--
            (1) conduct an annual assessment regarding the compliance 
        of covered issuers with the requirements of subsection (s) of 
        section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 
        78m), as added by section 4(a);
            (2) submit to the appropriate congressional committees a 
        report that contains the results of each assessment conducted 
        under paragraph (1); and
            (3) make each report submitted under paragraph (2) 
        accessible to the public.
    (b) Government Accountability Office.--The Comptroller General of 
the United States shall periodically evaluate, and report to the 
appropriate congressional committees on, the effectiveness of the 
Commission in carrying out and enforcing subsection (s) of section 13 
of the Securities Exchange Act of 1934 (15 U.S.C. 78m), as added by 
section 4(a).

SEC. 6. SEVERABILITY.

    If any provision of this Act, an amendment made by this Act, or the 
application of this Act (or an amendment made by this Act) to any 
person or circumstance is held to be invalid, that holding shall have 
no effect with respect to--
            (1) the remainder of this Act; and
            (2) the application of the provision or amendment, as 
        applicable, to any other person or circumstance.

SEC. 7. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated to the Commission such sums 
as may be necessary to carry out this Act.
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