[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 1217 Introduced in Senate (IS)]

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117th CONGRESS
  1st Session
                                S. 1217

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


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 19, 2021

 Ms. Warren (for herself, Mr. Schatz, Mr. Whitehouse, Mr. Blumenthal, 
 Mrs. Feinstein, Mr. Van Hollen, Mr. Markey, Ms. Klobuchar, Ms. Smith, 
Mrs. Gillibrand, Mr. Merkley, Mr. Bennet, Mr. Carper, Mr. Schumer, and 
  Mr. Booker) 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 certain 
    disclosures 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 
2021''.

SEC. 2. 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 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;
                    (C) the transition impacts that result as the 
                global economy transitions to a clean and renewable 
                energy, low-emissions economy, including financial 
                impacts as climate change causes fossil fuel assets to 
                become 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; and
                    (D) actions by Federal, State, Tribal, and local 
                governments to limit the worst effects of climate 
                change by enacting policies that keep the global 
                average surface temperature rise 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 Securities and Exchange Commission (referred to in 
        this Act as 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. 3. DISCLOSURES RELATING TO CLIMATE CHANGE.

    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) 1.5 degree scenario.--The term `1.5 degree 
                scenario' means a scenario that aligns with greenhouse 
                gas emissions pathways that aim for limiting global 
                warming to 1.5 degrees Celsius above pre-industrial 
                levels.
                    ``(B) Appropriate climate principals.--The term 
                `appropriate climate principals' means--
                            ``(i) the Administrator of the 
                        Environmental Protection Agency;
                            ``(ii) the Administrator of the National 
                        Oceanic and Atmospheric Administration;
                            ``(iii) the Director of the Office of 
                        Management and Budget;
                            ``(iv) the Secretary of the Interior;
                            ``(v) the Secretary of Energy; and
                            ``(vi) the head of any other Federal 
                        agency, as determined appropriate by the 
                        Commission.
                    ``(C) Baseline scenario.--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 an increase in the global average 
                temperature of 1.5 degrees Celsius or more above pre-
                industrial levels.
                    ``(D) Carbon dioxide equivalent.--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 subsection.
                    ``(E) Climate change.--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.
                    ``(F) Commercial development of fossil fuels.--The 
                term `commercial development of fossil fuels' 
                includes--
                            ``(i) exploration, extraction, processing, 
                        exporting, transporting, refining, and any 
                        other significant action with respect to oil, 
                        natural gas, or coal, any byproduct thereof, or 
                        any other solid or liquid hydrocarbons that are 
                        commercially produced; or
                            ``(ii) acquiring a license for any activity 
                        described in clause (i).
                    ``(G) Covered issuer.--The term `covered issuer' 
                means an issuer that is required to file an annual 
                report under subsection (a) or section 15(d).
                    ``(H) Direct and indirect greenhouse gas 
                emissions.--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), emitted 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.
                    ``(I) Fossil fuel reserve.--The term `fossil fuel 
                reserve' has the meaning given the term `reserves' 
                under the final rule of the Commission titled 
                `Modernization of Oil and Gas Reporting' (74 Fed. Reg. 
                2158; published January 14, 2009).
                    ``(J) Greenhouse gas.--The term `greenhouse gas'--
                            ``(i) means carbon dioxide, 
                        hydrofluorocarbons, methane, nitrous oxide, 
                        perfluorocarbons, sulfur hexafluoride, nitrogen 
                        triflouride, and chlorofluorocarbons;
                            ``(ii) includes any other 
                        anthropogenically-emitted gas that the 
                        Administrator of the Environmental Protection 
                        Agency determines, after notice and comment, to 
                        contribute to climate change; and
                            ``(iii) includes any other 
                        anthropogenically-emitted gas that the 
                        Intergovernmental Panel on Climate Change 
                        determines to contribute to climate change.
                    ``(K) Greenhouse gas emissions.--The term 
                `greenhouse gas emissions' means the emissions of 
                greenhouse gas, expressed in terms of metric tons of 
                carbon dioxide equivalent.
                    ``(L) Physical risks.--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) financial risks to long-lived fixed 
                        assets, locations, operations, or value chains 
                        resulting from--
                                    ``(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; and
                                    ``(VIII) decreased availability of 
                                fresh water; and
                            ``(ii) any other financial risks to long-
                        lived fixed assets, locations, operations, or 
                        value chains determined appropriate by the 
                        Commission, in consultation with the 
                        appropriate climate principals.
                    ``(M) Social cost of carbon.--The term `social cost 
                of carbon' means the social cost of carbon, as 
                described in the technical support document entitled 
                `Technical Support Document: Technical Update of the 
                Social Cost of Carbon for Regulatory Impact Analysis 
                Under Executive Order 12866', published by the 
                Interagency Working Group on Social Cost of Greenhouse 
                Gases, United States Government, in August 2016 or any 
                successor or substantially related estimate of the 
                monetized damages associated with an incremental 
                increase in carbon dioxide emissions in a given year.
                    ``(N) Transition risks.--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).
                    ``(O) Value chain.--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, transportation, and 
                        disposal with respect to the product or service 
                        described in clause (i).
            ``(2) Findings.--Congress finds that--
                    ``(A) 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--
                            ``(i) may reasonably expect to affect 
                        shareholder decision making; and
                            ``(ii) should regularly identify, evaluate, 
                        and disclose; and
                    ``(B) the disclosure of information described in 
                subparagraph (A) should--
                            ``(i) identify, and evaluate--
                                    ``(I) material physical and 
                                transition risks posed by climate 
                                change; and
                                    ``(II) the potential financial 
                                impact of the risks described in 
                                subclause (I);
                            ``(ii) detail any implications that the 
                        risks described in clause (i)(I) have on 
                        corporate strategy;
                            ``(iii) detail any board-level oversight of 
                        material climate-related risks and 
                        opportunities;
                            ``(iv) 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;
                            ``(v) allow for tracking of performance 
                        over time with respect to mitigating climate 
                        risk exposure; and
                            ``(vi) 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 any rules issued by 
        the Commission under this subsection, 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 any 
                strategy the covered issuer has for addressing climate 
                risks when differing climate scenarios are taken into 
                consideration; and
                    ``(E) a description of how climate risk is 
                incorporated into the overall risk management strategy 
                of the covered issuer.
            ``(4) Rule of construction.--Nothing in paragraph (3) 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 such 
        paragraph.
            ``(5) Rulemaking.--The Commission, in consultation with the 
        appropriate climate principals, shall, not later than 2 years 
        after the date of enactment of this subsection, issue rules 
        with respect to the information that a covered issuer is 
        required to disclose pursuant to this subsection and such rules 
        shall--
                    ``(A) establish climate-related risk disclosure 
                rules, which shall--
                            ``(i) 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;
                            ``(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--
                                    ``(I) disaggregate, to the extent 
                                practicable, 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;
                            ``(iii) 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;
                            ``(iv) specify requirements for, and the 
                        disclosure of, input parameters, assumptions, 
                        and analytical choices to be used in climate 
                        scenario analyses required under subparagraph 
                        (B)(ii), including--
                                    ``(I) present value discount rates; 
                                and
                                    ``(II) time frames to consider, 
                                including 5-, 10-, and 20-year time 
                                frames; and
                            ``(v) include reporting standards and 
                        guidance with respect to the information 
                        required under subparagraph (B)(iii);
                    ``(B) require that a covered issuer, with respect 
                to a disclosure required under this subsection--
                            ``(i) incorporate into such disclosure--
                                    ``(I) quantitative analysis to 
                                support any qualitative statement made 
                                by the covered issuer;
                                    ``(II) the rules established under 
                                subparagraph (A);
                                    ``(III) industry-specific metrics 
                                that comply with the requirements under 
                                subparagraph (A)(i);
                                    ``(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 clause (ii); and
                                    ``(VI) the total cost attributable 
                                to the direct and indirect greenhouse 
                                gas emissions of the covered issuer, 
                                using, at minimum, the social cost of 
                                carbon;
                            ``(ii) consider, when preparing any 
                        qualitative or quantitative risk analysis 
                        statement contained in the disclosure--
                                    ``(I) a baseline scenario that 
                                includes physical risks with respect to 
                                climate change;
                                    ``(II) a 1.5 degree scenario; and
                                    ``(III) 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--
                                    ``(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--
                                            ``(aa) combustion;
                                            ``(bb) flared hydrocarbons;
                                            ``(cc) process emissions;
                                            ``(dd) directly vented 
                                        emissions;
                                            ``(ee) fugitive emissions 
                                        or leaks; and
                                            ``(ff) land use changes;
                                    ``(II) a description of--
                                            ``(aa) the sensitivity of 
                                        fossil fuel reserve levels to 
                                        future price projection 
                                        scenarios that incorporate the 
                                        social cost of carbon;
                                            ``(bb) the percentage of 
                                        the reserves of the covered 
                                        issuer that will be developed 
                                        under the scenarios established 
                                        in clause (ii), as well as a 
                                        forecast for the development 
                                        prospects of each reserve under 
                                        those scenarios;
                                            ``(cc) the potential amount 
                                        of direct and indirect 
                                        greenhouse gas emissions that 
                                        are embedded in proved and 
                                        probable 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 and consumption 
                                        in operations of the covered 
                                        issuer; and
                                            ``(ff) the percentage of 
                                        the water described in item 
                                        (ee) that comes from regions of 
                                        water stress or that face 
                                        wastewater management 
                                        challenges; and
                                    ``(III) any other information that 
                                the Commission 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);
                    ``(C) require that a covered issuer include in such 
                a 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); and
                    ``(D) establish how and where the required 
                disclosures shall be addressed in the annual financial 
                filing of the covered issuer.
            ``(6) Formatting.--The Commission shall require covered 
        issuers to disclose information under this subsection in an 
        interactive data format and shall develop standards for such 
        format, 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 
                paragraph (2).
            ``(7) Periodic update of rules.--The Commission shall 
        periodically update the rules issued under this subsection.
            ``(8) Compilation of information disclosed.--The Commission 
        shall, to the maximum extent practicable, make a compilation of 
        the information disclosed by covered issuers under this 
        subsection publicly available on the website of the Commission 
        and update such compilation at least once each year.
            ``(9) Reports.--
                    ``(A) Report to congress.--The Commission shall--
                            ``(i) conduct an annual assessment 
                        regarding the compliance of covered issuers 
                        with the requirements of this subsection;
                            ``(ii) submit to the appropriate 
                        congressional committees a report that contains 
                        the results of each assessment conducted under 
                        clause (i); and
                            ``(iii) make each report submitted under 
                        clause (ii) accessible to the public.
                    ``(B) GAO report.--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 this subsection.''.

SEC. 4. BACKSTOP.

    If, 2 years after the date of enactment of this Act, the Commission 
has not issued the rules required under subsection (s) of section 13 of 
the Securities Exchange Act of 1934 (15 U.S.C. 78m), as added by 
section 3 of this Act, and until the date on which the Commission 
issues those rules, a covered issuer (as defined in such subsection 
(s)) shall be deemed to be in compliance with such subsection (s) if 
disclosures set forth in the annual report of that 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. 5. AUTHORIZATION OF APPROPRIATIONS.

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