[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 3167 Introduced in Senate (IS)]

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117th CONGRESS
  1st Session
                                S. 3167

 To amend the Bank Holding Company Act of 1956 and the Dodd-Frank Wall 
  Street Reform and Consumer Protection Act to require disclosure of 
          certain financed emissions, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            November 4, 2021

Mr. Markey (for himself and Mr. Merkley) introduced the following bill; 
which was read twice and referred to the Committee on Banking, Housing, 
                           and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
 To amend the Bank Holding Company Act of 1956 and the Dodd-Frank Wall 
  Street Reform and Consumer Protection Act to require disclosure of 
          certain financed emissions, 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 ``Fossil Free Finance Act''.

SEC. 2. ALIGNMENT OF FINANCED 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:

``SEC. 15. ALIGNMENT OF FINANCED EMISSIONS WITH SCIENCE-BASED TARGETS.

    ``(a) 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 emissions.--The term `financed emissions' 
        means, with respect to a covered bank holding company, and any 
        nonbank financial 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, refineries, or utility-sale 
                generation facility.
            ``(6) 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.
            ``(7) 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) combustion of oil, natural gas or coal for 
                utility-scale electricity generation.
    ``(b) Requirements.--Not later than 210 days after the date of the 
enactment of this subsection, 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 (d), 
        implement such plan.
    ``(c) Elements of Plan.--Each plan required under subsection 
(b)(1)--
            ``(1) shall include--
                    ``(A) a plan for the covered bank holding company 
                to reach zero financed emissions by January 1, 2050;
                    ``(B) a plan to reduce the financed emissions of 
                the bank holding company by 50 percent by January 1, 
                2030;
                    ``(C) a plan to discontinue new or expanded fossil 
                fuel projects not later than January 1, 2023;
                    ``(D) a plan for the covered bank holding company 
                to discontinue thermal coal financing by January 1, 
                2025;
                    ``(E) a plan for the covered bank holding company 
                to discontinue fossil fuel financing by January 1, 
                2030; and
                    ``(F) a plan for the covered bank holding company 
                to eliminate financing of deforestation risk 
                commodities;``
                    ``(G) 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) may include proven negative carbon emission 
        technologies to meet the requirements under paragraph (1)(A) 
        alone, provided that these projects do not negatively impact 
        low-income, minority, or indigenous communities;
            ``(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 
                emissions.
    ``(d) Consideration of Plan.--Not later than 6 months after 
receiving a plan under subsection (b)(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.
    ``(e) 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 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; and
            ``(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).
    ``(f) Regulations.--Not later than 180 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.''.

SEC. 3. 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 emissions (as 
                defined in section 15 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:
                    ``(K) the extent to which the company makes a non-
                trivial contribution to the financed emissions (as 
                defined in section 15 of the Bank Holding Company Act 
                of 1956) of the financial system of the United States; 
                and''.
    (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 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.).''.

SEC. 4. REPORTS.

    (a) 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) Financed emissions.--The term ``financed emissions'' 
        means, with respect to a covered bank holding company, and any 
        nonbank financial 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.
            (3) 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.
    (b) Initial Report.--Not later than 180 days after the date of the 
enactment of this subsection, the Board of Governors of the Federal 
Reserve System shall submit a report to Congress that--
            (1) identifies current level of financed emissions in the 
        financial system of the United States;
            (2) includes an analysis of trends in financed emissions 
        reductions;
            (3) includes a summary of the commitments of covered bank 
        holding companies to reduce financed emissions;
            (4) estimates the financed emissions in the financial 
        system of the United States needed to meet science-based 
        emissions targets;
            (5) identifies regulatory gaps in reducing financed 
        emissions that cannot be addressed with authorities of the 
        Board and recommendations for addressing such gaps;
            (6) identifies data quality challenges for assessing 
        financed emissions and recommendations to address those 
        challenges;
            (7) identifies the equitable transition needs for workers 
        and communities that will be impacted by a shift to a zero 
        financed emissions economy;
            (8) analyzes--
                    (A) the number and groups of people affected by a 
                transition to zero financed emissions; and
                    (B) the economic impact of such a transition with 
                respect to such groups; and
            (9) identifies regulatory and legislative options for 
        mitigating the economic impacts described in paragraph (8)(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 emissions economy.
    (c) Periodic Report.--Not later than 180 days after the date of the 
enactment of this subsection 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 emissions targets;
            (2) the estimates described in subsection (b)(4); and
            (3) an analysis of the progress made in the preceding 2 
        years towards an equitable transition to a zero financed 
        emissions economy; and
            (4) recommendations with respect to assistance Congress and 
        other Federal agencies may provide to--
                    (A) facilitate a reduction of financed emissions; 
                and
                    (B) support an equitable transition to a zero 
                financed emissions economy.
    (d) 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.
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