[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 2075 Introduced in Senate (IS)]

<DOC>






116th CONGRESS
  1st Session
                                S. 2075

  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

                             July 10, 2019

 Ms. Warren (for herself, Mr. Schatz, Mr. Whitehouse, Mr. Van Hollen, 
Ms. Klobuchar, Mrs. Gillibrand, Mr. Bennet, Mr. Blumenthal, Mr. Booker, 
  Mr. Markey, Mr. Merkley, Ms. Harris, Ms. Smith, Mrs. Feinstein, Mr. 
Schumer, and Mr. Carper) 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 
2019''.

SEC. 2. DEFINITIONS.

    In this Act--
            (1) the terms ``appropriate climate principals'', ``climate 
        change'', ``covered issuer'', ``physical risks'', and 
        ``transition risks'' have the meanings given those terms in 
        subsection (s) of section 13 of the Securities Exchange Act of 
        1934 (15 U.S.C. 78m), as added by section 5;
            (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 ``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--
                    (A) an increase in the global average temperature 
                of 1.5 degrees Celsius or more above pre-industrial 
                levels; and
                    (B) the realization of physical risks relating to 
                global climate change;
            (4) the term ``carbon dioxide equivalent'' means the number 
        of metric tons of carbon dioxide emissions with the same global 
        warming potential as 1 metric ton of another greenhouse gas, 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 Act;
            (5) the term ``commercial development of fossil fuels'' 
        includes--
                    (A) exploration, extraction, processing, exporting, 
                transporting, and any other significant action with 
                respect to oil, natural gas, coal, or any byproduct 
                thereof; and
                    (B) acquiring a license for any activity described 
                in subparagraph (A);
            (6) the term ``Commission'' means the Securities and 
        Exchange Commission;
            (7) the term ``direct and indirect greenhouse gas 
        emissions'' includes, with respect to a covered issuer--
                    (A) all direct greenhouse gas emissions released by 
                the covered issuer;
                    (B) all indirect greenhouse gas emissions with 
                respect to electricity, heat, or steam purchased by the 
                covered issuer;
                    (C) significant indirect emissions, other than the 
                emissions described in subparagraph (B), that occur in 
                the value chain of the covered issuer; and
                    (D) 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;
            (8) the term ``fossil fuel reserves'' means all producing 
        assets, proved reserves, unproved resources, and any other 
        ownership stake in sources of fossil fuels;
            (9) the term ``greenhouse gas''--
                    (A) means carbon dioxide, hydrofluorocarbons, 
                methane, nitrous oxide, perfluorocarbons, sulfur 
                hexafluoride, nitrogen triflouride, and 
                chlorofluorocarbons; and
                    (B) includes any other anthropogenically emitted 
                gas or particulate that the Administrator of the 
                Environmental Protection Agency determines, after 
                notice and comment, to contribute to climate change;
            (10) the term ``greenhouse gas emissions'' means the 
        emissions of greenhouse gas, expressed in terms of metric tons 
        of carbon dioxide equivalent;
            (11) 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--
                    (A) changes in net agricultural productivity;
                    (B) decreases in capital and labor productivity;
                    (C) effects on human health;
                    (D) property damage from increased sea-level rise, 
                flooding, wildfires, and frequency and severity of 
                extreme weather events;
                    (E) the value of ecosystem services; and
                    (F) any other type of economic, social, political, 
                or natural disruption;
            (12) the term ``value chain''--
                    (A) means the total lifecycle of a product or 
                service, both before and after production of the 
                product or service, as applicable; and
                    (B) may include the sourcing of materials, 
                production, and disposal with respect to the product or 
                service described in subparagraph (A);
            (13) the term ``well below 1.5 degrees 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 
        1.5 degrees Celsius above pre-industrial levels; and
            (14) the term ``1.5 degree 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 1.5 
        degrees Celsius above pre-industrial levels.

SEC. 3. SENSE OF CONGRESS.

    It is the sense of Congress that--
            (1) climate change poses a significant and increasing 
        threat to the growth and stability of the economy of the United 
        States;
            (2) many sectors of the economy of the United States and 
        many businesses in 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, 
                accelerating sea-level rise, desertification, ocean 
                acidification, intensification of storms, increase in 
                heavy precipitation, more frequent and intense 
                temperature extremes, more severe droughts, and longer 
                wildfire seasons;
                    (B) the economic disruptions and security threats 
                that result from the physical impacts described in 
                subparagraph (A), including conflicts over scarce 
                resources, conditions conducive to violent extremism, 
                the spread of infectious diseases, and forced 
                migration; and
                    (C) the transition impacts that result as the 
                global economy transitions to a clean and renewable 
                energy, low-emissions economy, including financial 
                impacts as fossil fuel assets risk becoming stranded 
                and it becomes uneconomic for companies to develop 
                fossil fuel assets as policymakers act to limit the 
                worst impacts of climate change by keeping the rise in 
                average global temperature to 1.5 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 to their investors, lenders, and 
        insurers;
            (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) investors, lenders, and insurers are increasingly 
        demanding climate risk information that is consistent, 
        comparable, reliable, and clear;
            (7) including standardized, material climate change risk 
        and opportunity 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;
            (8) requiring companies to disclose climate-related risk 
        exposure and risk management strategies will encourage a 
        smoother transition to a clean and renewable energy, low-
        emissions economy and guide capital allocation to mitigate, and 
        adapt to, the effects of climate change and limit damages 
        associated with climate-related events and disasters; and
            (9) 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. FINDINGS.

    Congress finds that--
            (1) short-, medium-, and 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--
                    (A) may reasonably expect to affect shareholder 
                decision making; and
                    (B) should regularly identify, evaluate, and 
                disclose; and
            (2) the disclosure of information described in paragraph 
        (1) should--
                    (A) identify, and evaluate--
                            (i) material physical and transition risks 
                        posed by climate change; and
                            (ii) the potential financial impact of 
                        risks described in clause (i);
                    (B) detail any implications that the risks 
                described in subparagraph (A)(i) have on corporate 
                strategy;
                    (C) detail any board-level oversight of material 
                climate-related risks and opportunities;
                    (D) 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;
                    (E) allow for tracking of performance over time 
                with respect to mitigating climate risk exposure; and
                    (F) incorporate a price on greenhouse gas emissions 
                in financial analyses that reflects, at minimum, the 
                social cost of carbon that is attributable to issuers.

SEC. 5. DISCLOSURES RELATING TO CLIMATE CHANGE.

    (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 `appropriate climate principals' 
                means--
                            ``(i) the Administrator of the 
                        Environmental Protection Agency;
                            ``(ii) the Secretary of Energy;
                            ``(iii) the Administrator of the National 
                        Oceanic and Atmospheric Administration;
                            ``(iv) the Director of the Office of 
                        Management and Budget; and
                            ``(v) the head of any other Federal agency 
                        determined appropriate by the Commission;
                    ``(B) the term `climate change' means a change of 
                climate that is--
                            ``(i) attributed directly or indirectly to 
                        human activity that alters the composition of 
                        the global atmosphere; and
                            ``(ii) in addition to natural climate 
                        variability observed over comparable time 
                        periods;
                    ``(C) the term `covered issuer' means an issuer 
                that is required to file an annual report under 
                subsection (a) or section 15(d);
                    ``(D) 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 
                        and increased frequency of temperature 
                        extremes;
                            ``(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;
                            ``(viii) decreased availability of fresh 
                        water; and
                            ``(ix) any other financial risks to long-
                        lived fixed assets, locations, operations, or 
                        value chains determined appropriate by the 
                        Commission, in consultation with appropriate 
                        climate principals;
                    ``(E) 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);
            ``(2) Disclosure.--Each covered issuer, in any annual 
        report filed by the covered issuer under subsection (a) or 
        section 15(d), shall, in accordance with any rules issued by 
        the Commission pursuant to the Climate Risk Disclosure Act of 
        2019, 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;
                    ``(B) a description of any established corporate 
                governance processes and structures to identify, 
                assess, and manage climate-related risks;
                    ``(C) a description of specific actions that the 
                covered issuer is taking to mitigate identified risks;
                    ``(D) a description of the resilience of the 
                strategy of the covered issuer for addressing climate 
                risks, taking into account different climate scenarios; 
                and
                    ``(E) a description of how climate risk is 
                incorporated into the overall risk management strategy 
                of the covered issuer.
            ``(3) Rule of construction.--Nothing in paragraph (2) 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 that 
        paragraph.''.

SEC. 6. RULEMAKING.

    (a) Climate Risk Disclosure Rules.--Not later than 2 years after 
the date of enactment of this Act, the Commission, in consultation with 
the appropriate climate principals, shall issue rules with respect to 
the information that a covered issuer is required to disclose pursuant 
to subsection (s) of section 13 of the Securities Exchange Act of 1934 
(15 U.S.C. 78m), as added by section 5, which shall--
            (1) establish, in consultation with the appropriate climate 
        principals, climate-related risk disclosure guidance, which 
        shall--
                    (A) be, to the extent practicable, specialized for 
                industries within specific sectors of the economy, 
                which shall include--
                            (i) the sectors of finance, insurance, 
                        transportation, electric power, mining, and 
                        non-renewable energy; and
                            (ii) any other sector determined 
                        appropriate by the Commission, in consultation 
                        with the appropriate climate principals;
                    (B) 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--
                            (i) separate, to the extent practicable, 
                        the total emissions of each specified 
                        greenhouse gas by the covered issuer; and
                            (ii) include greenhouse gas emissions by 
                        the covered issuer during the period covered by 
                        the disclosure;
                    (C) include reporting standards for disclosing, 
                with respect to a covered issuer--
                            (i) the total amount of fossil fuel-related 
                        assets owned or managed by the covered issuer; 
                        and
                            (ii) the percentage of fossil fuel-related 
                        assets as a percentage of total assets owned or 
                        managed by the covered issuer;
                    (D) establish a minimum social cost of carbon, 
                which--
                            (i) shall be considered a minimum price 
                        with respect to costs associated with carbon 
                        emissions;
                            (ii) a covered issuer shall use in 
                        preparing climate-related disclosure 
                        statements; and
                            (iii) the Commission shall make publicly 
                        available, including all assumptions and 
                        methods used in the calculations;
                    (E) not preclude a covered issuer from using and 
                disclosing, as compared with the price established 
                under subparagraph (D), a higher price of greenhouse 
                gas emissions;
                    (F) specify requirements for, and the disclosure 
                of, input parameters, assumptions, and analytical 
                choices to be used in climate scenario analyses 
                required under paragraph (2)(A), including--
                            (i) present value discount rates;
                            (ii) time frames to consider, including 5-, 
                        10-, and 20-year time frames; and
                            (iii) the minimum pricing of greenhouse gas 
                        emissions, as established under subparagraph 
                        (D) and subject to subparagraph (E); and
                    (G) include, after consultation with the 
                Administrator of the Environmental Protection Agency, 
                the Secretary of Energy, the Secretary of the Interior, 
                the Secretary of Agriculture, the Secretary of 
                Transportation, the Chair of the Council on 
                Environmental Quality, and the Director of the Office 
                of Science and Technology Policy documentation 
                standards and guidance with respect to the information 
                required under paragraph (2)(C);
            (2) require that a covered issuer, with respect to a 
        disclosure required under subsection (s) of section 13 of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78m), as added by 
        section 5--
                    (A) incorporate into the disclosure--
                            (i) quantitative analysis to support any 
                        qualitative statement made by the covered 
                        issuer;
                            (ii) the guidance established under 
                        paragraph (1);
                            (iii) industry-specific metrics that comply 
                        with the requirements under paragraph (1)(A);
                            (iv) specific risk management actions that 
                        the covered issuer is taking to address 
                        identified risks;
                            (v) 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 paragraph (1)(B);
                            (vi) the total cost of carbon attributable 
                        to the direct and indirect greenhouse gas 
                        emissions of the covered issuer, using, at 
                        minimum, the social cost of carbon; and
                            (vii) 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--
                            (viii) necessary;
                            (ix) appropriate to safeguard the public 
                        interest; or
                            (x) directed at ensuring that investors are 
                        informed in accordance with the findings 
                        described in section 4;
                    (B) consider, when preparing any qualitative or 
                quantitative risk analysis statement contained in the 
                disclosure--
                            (i) a baseline scenario that includes 
                        physical impacts of climate change;
                            (ii) a well below 1.5 degrees scenario; and
                            (iii) any additional climate analysis 
                        scenario considered appropriate by the 
                        Commission, in consultation with the 
                        appropriate climate principals; and
                    (C) if the covered issuer engages in the commercial 
                development of fossil fuels, include in the 
                disclosure--
                            (i) an estimate of the total and a 
                        disaggregated amount of direct and indirect 
                        greenhouse gas emissions of the covered issuer 
                        that are attributable to--
                                    (I) combustion;
                                    (II) flared hydrocarbons;
                                    (III) process emissions;
                                    (IV) directly vented emissions;
                                    (V) fugitive emissions or leaks; 
                                and
                                    (VI) land use changes;
                            (ii) a description of--
                                    (I) the sensitivity of fossil fuel 
                                reserves levels to future price 
                                projection scenarios that incorporate 
                                the social cost of carbon into 
                                hydrocarbon pricing;
                                    (II) the percentage of the reserves 
                                of the covered issuer that will be 
                                developed under the scenarios 
                                established in subparagraph (B), as 
                                well as a forecast for the development 
                                prospects of each reserve under the 
                                scenarios established in subparagraph 
                                (B);
                                    (III) 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;
                                    (IV) the methodology of the covered 
                                issuer for detecting and mitigating 
                                fugitive methane emissions, which shall 
                                include--
                                            (aa) the frequency with 
                                        which applicable assets of the 
                                        covered issuer are observed for 
                                        methane leaks;
                                            (bb) the processes and 
                                        technology that the covered 
                                        issuer uses to detect methane 
                                        leaks;
                                            (cc) the percentage of 
                                        assets of the covered issuer 
                                        that the covered issuer 
                                        inspects under that 
                                        methodology; and
                                            (dd) quantitative and time-
                                        bound reduction goals of the 
                                        covered issuer with respect to 
                                        methane leaks;
                                    (V) the amount of water that the 
                                covered issuer withdraws from 
                                freshwater sources for use and 
                                consumption in operations of the 
                                covered issuer; and
                                    (VI) the percentage of the water 
                                described in subclause (V) that comes 
                                from regions of water stress or that 
                                face wastewater management challenges; 
                                and
                            (iii) any other information that the 
                        Commission, in consultation with the 
                        appropriate climate principals and the 
                        Administrator of the Environmental Protection 
                        Agency, the Secretary of Energy, the Secretary 
                        of the Interior, and the Secretary of 
                        Agriculture 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 section 
                                4; and
            (3) establish how and where the required disclosures shall 
        be addressed in the annual financial filing of a covered 
        issuer.
    (b) Formatting.--The Commission shall--
            (1) require covered issuers to disclose information in an 
        interactive data format; and
            (2) develop standards for the format described in paragraph 
        (1), which shall include electronic tags for information that 
        the Commission determines is--
                    (A) necessary;
                    (B) appropriate to safeguard the public interest; 
                or
                    (C) directed at ensuring that investors are 
                informed in accordance with the findings described in 
                section 4.
    (c) Periodic Update of Rules.--The Commission shall periodically 
update the rules issued under this section to ensure that the rules 
further the findings described in section 4(2).

SEC. 7. COMPILATION OF INFORMATION DISCLOSED.

    The Commission shall, to the maximum extent practicable--
            (1) make a compilation of the information disclosed by 
        issuers pursuant to subsection (s) of section 13 of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78m), as added by 
        section 5, publicly available on the website of the Commission; 
        and
            (2) update the compilation described in paragraph (1) not 
        less frequently than once each year.

SEC. 8. BACKSTOP.

    If, 2 years after the date of enactment of this Act, the Commission 
has not issued rules pursuant to section 6, and until those rules are 
issued, a covered issuer shall be deemed in compliance with subsection 
(s) of section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 
78m), as added by section 5, if disclosures set forth in the annual 
report of the covered issuer satisfy the recommendations of the Task 
Force on Climate-related Financial Disclosures of the Financial 
Stability Board as reported in June 2017, or any successor report, and 
as supplemented or adjusted by such rules, guidance, or other comments 
from the Commission.

SEC. 9. 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 5;
            (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 5.

SEC. 10. 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. 11. 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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