Short title

This Act may be cited as the

Fossil Free Finance Act

Alignment of financed greenhouse gas 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:

15.

Alignment of financed greenhouse gas emissions with science-based targets

(a)

Requirements

Not later than July 1, 2022, 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 (c), implement such plan.(b)

Elements of plan

Each plan required under subsection (a)(1)—(1)shall include—(A)a plan for the covered bank holding company to reach zero financed greenhouse gas emissions by January 1, 2050;(B)a plan for the equitable transition to zero financed greenhouse gas emissions;(C)a plan to reduce the financed greenhouse gas emissions of the bank holding company by 50 percent by January 1, 2030;(D)a plan to discontinue new or expanded fossil fuel projects not later than January 1, 2023;(E)a plan for the covered bank holding company to discontinue thermal coal financing by January 1, 2025;(F)a plan for the covered bank holding company to discontinue fossil fuel financing by January 1, 2030;(G)a review of the emissions supply chains financed by the covered bank holding company;(H)a plan for the covered bank holding company to eliminate financing of deforestation risk commodities; and(I)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)with respect to negative carbon emission technologies—(A)may include such technologies to meet the requirements under paragraph (1)(A) if such technologies—(i)are proven to work at the required scale; (ii)do not negatively impact low-income, minority, or indigenous communities; and(iii)do not exceed 5 percent of the projected 2030 financed greenhouse gas emissions of the covered bank holding company; and(B)may not include such technologies to meet the requirements under paragraph (1)(C); and(4)shall prioritize—(A)the covered bank holding company withdrawing funding from companies and projects that have a disproportionately negative impact on health and well-being of low-income and minority communities; and(B)lending to companies for purposes of carrying out severance, retraining, and other benefits to workers impacted by the transition to zero financed greenhouse gas emissions.(c)

Consideration of plan

Not later than 6 months after receiving a plan under subsection (a)(1), the Board shall—(1)accept the plan; or(2)reject the plan if it does not align with science-based targets without the use of offsets or unproven carbon emission reduction technologies and require the covered bank holding company to revise such plan in accordance with the suggestions of the Board.(d)

Penalties

In the case of a covered bank holding company that 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, through procedures prescribed by the Board by rule;(B)require divestiture of assets in order to bring the financed greenhouse gas 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 such covered bank holding company;(2)the Board of Directors of the Federal Deposit Insurance Corporation may, with respect to any covered bank holding company described in paragraph (2)(B) or a subsidiary of such bank holding company that contributes to the failure of such covered bank holding company to comply with this section—(A)terminate insurance 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). (e)

Regulations

Not later than 210 days after the date of the enactment of this section, the Board shall issue regulations establishing the format and timing for submission of the plans required under this section. (f)

Definitions

In this section:(1)

Covered bank holding company

The term covered bank holding company means a bank holding company with total consolidated assets equal to or greater than $50,000,000,000.(2)

Deforestation risk commodities

The term deforestation risk commodities means globally-traded goods and raw materials—(A)that originate from natural forest ecosystems, either—(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 non-forest land use. (3)

Financed greenhouse gas emissions

The term financed greenhouse gas emissions means, with respect to a covered bank holding company, the share of the emissions of such company attributable to investment in, or the providing of financial services to, a company or project of a 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.(4)

Fossil fuel financing

The term fossil fuel financing means, with respect to a covered bank holding company, investment in—(A)a company that derives 15 percent or more of 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.(5)

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 in subparagraph (A), such as wells, pipelines, terminals or refineries.(6)

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)generating capacity of oil, natural gas or coal. (7)

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.(8)

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 greater than or equal to 1.5 degrees Celsius compared to pre-industrial levels.

Contribution to climate change included in FSOC designation

(a)

Authority To require supervision and regulation of certain nonbank financial companies

Section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (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 non-trivial contribution to the financed greenhouse gas emissions (as defined in section 15(f) of the Bank Holding Company Act of 1956) of the financial system of the United States;

; 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:

(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 Dodd-Frank Wall Street Reform and Consumer Protection Act (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 greenhouse gas emissions (as defined in section 15 of the Bank Holding Company Act of 1956).

(2)

Required standards

Section 165(b)(1)(A) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5365(b)(1)(A)) is amended—(A)in clause (iv), by striking and;(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 (12 U.S.C. 1841 et seq.).

Reports

(a)

Initial report

Not later than July 1, 2022, the Board of Governors of the Federal Reserve System shall submit a report to Congress that—(1)identifies current level of financed greenhouse gas emissions (as defined in section 15 of the Bank Holding Company Act of 1956) in the financial system of the United States;(2)includes an analysis of trends in financed greenhouse gas emissions reductions;(3)includes a summary of the commitments of covered bank holding companies (as defined in section 15 of the Bank Holding Company Act of 1956) to reduce financed greenhouse gas emissions;(4)includes projections of estimated temperature rise through January 1, 2100, based on latest climate science—(A)if current emission trends continue; or(B)if bank holding companies meet voluntary financed greenhouse gas emissions goals; (5)estimates the financed greenhouse gas emissions in the financial system of the United States needed to meet science-based emissions targets (as defined in section 15 of the Bank Holding Company Act of 1956); (6)identifies regulatory gaps in reducing financed greenhouse gas emissions that cannot be addressed with authorities of the Board and recommendations for addressing such gaps; (7)identifies data quality challenges for assessing financed greenhouse gas emissions and recommendations to address those challenges;(8)identifies the equitable transition needs for workers and communities that will be impacted by a shift to a zero financed greenhouse gas emissions economy; (9)analyzes—(A)the number and groups of people affected by a transition to zero financed greenhouse gas emissions; and(B)the economic impact of such a transition with respect to such groups; and(10)identifies regulatory and legislative options for mitigating the economic impacts described in paragraph (9)(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 greenhouse gas emissions economy.(b)

Periodic report

Not later than July 1, 2024, and not less than once every 2 years thereafter, the Board of Governors of the Federal Reserve System shall submit a report to Congress that includes—(1)an analysis of the progress against aligning with financed greenhouse gas emissions targets;(2)the projections described in subsection (a)(4); and(3)an analysis of the progress made in the preceding 2 years towards an equitable transition to a zero financed greenhouse gas emissions economy; and(4)recommendations with respect to assistance Congress and other Federal agencies may provide to—(A)facilitate a reduction of financed greenhouse gas emissions; and(B)support an equitable transition to a zero financed greenhouse gas emissions economy.(c)

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 under this section.