[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 1138 Introduced in Senate (IS)]

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118th CONGRESS
  1st Session
                                S. 1138

    To amend the Bank Holding Company Act of 1956 and the Financial 
 Stability Act of 2010 to require a reduction of financed emissions to 
          protect financial stability, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 30, 2023

 Mr. Markey (for himself, Mr. Merkley, and Mr. Sanders) 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 Financial 
 Stability Act of 2010 to require a reduction of financed emissions to 
          protect financial stability, 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 of 2023''.

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) Carbon offsets--The term `carbon offsets' means an 
        emissions reduction or removal of greenhouse gases in a manner 
        calculated and traced for the purpose of offsetting an entity's 
        greenhouse gas emissions.
            ``(2) Covered bank holding company.--The term `covered bank 
        holding company' means a bank holding company with total 
        consolidated assets not less than $50,000,000,000.
            ``(3) Deforestation risk commodities.--The term 
        `deforestation risk commodities' means globally traded goods 
        and raw materials--
                    ``(A) that originate from natural forest 
                ecosystems--
                            ``(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 
                nonforest land use.
            ``(4) Financed emissions.--The term `financed emissions' 
        means, with respect to a covered bank holding company, and any 
        nonbank financial company supervised by the Board in accordance 
        with section 113 of the Financial Stability Act of 2010 (12 
        U.S.C. 5323), the greenhouse gas emissions of such company, 
        expressed in metric tons of carbon dioxide equivalent, 
        attributable to investment in, or the providing of financial 
        services to, another company or project of another 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.
            ``(5) Fossil fuel financing.--The term `fossil fuel 
        financing' means, with respect to a covered bank holding 
        company, investment in--
                    ``(A) a company that derives not less than 15 
                percent 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.
            ``(6) 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 described in subparagraph (A), such as 
                wells, pipelines, terminals, refineries, or utility-
                sale generation facilities.
            ``(7) Greenhouse gas.--The term `greenhouse gas' means 
        carbon dioxide, methane, nitrous oxide, nitrogen trifluoride, 
        hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.
            ``(8) 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.
            ``(9) 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 
enactment of this section, 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 not later than January 
                1, 2050;
                    ``(B) a plan to reduce the financed emissions of 
                the bank holding company by 50 percent not later than 
                January 1, 2030;
                    ``(C) a plan to discontinue new or expanded fossil 
                fuel projects not later than 60 days after the date of 
                enactment of this section;
                    ``(D) a plan for the covered bank holding company 
                to discontinue thermal coal financing not later than 
                January 1, 2025;
                    ``(E) a plan for the covered bank holding company 
                to discontinue all fossil fuel financing not later than 
                January 1, 2030;
                    ``(F) a plan for the covered bank holding company 
                to eliminate financing of deforestation risk 
                commodities; and
                    ``(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) if 
        the technologies 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 the health and 
                well-being of low-income and minority communities;
                    ``(B) lending to companies for purposes of carrying 
                out severance, retraining, and other benefits to 
                workers impacted by the transition to zero financed 
                emissions; and
                    ``(C) enhanced due diligence about the impacts of 
                financing on biodiversity and community and the 
                framework of the client for and track record in--
                            ``(i) managing greenhouse gas and other 
                        emissions; and
                            ``(ii) compliance with regulations and 
                        international standards.
    ``(d) Consideration of Plan.--Not later than 180 days after the 
date on which the Board receives a plan submitted under subsection 
(b)(1), the Board shall--
            ``(1) accept the plan; or
            ``(2)(A) reject the plan if the plan does not align with 
        science-based targets without the use of offsets or unproven 
        carbon emission reduction technologies; and
            ``(B) require the covered bank holding company to revise 
        such plan in accordance with the suggestions of the Board.
    ``(e) Penalties.--If a covered bank holding company 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 under 
                regulations prescribed by the Board;
                    ``(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 
                the 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 (1)(C) or a subsidiary 
        of the bank holding company that contributes to the failure of 
        the covered bank holding company to comply with this section--
                    ``(A) terminate the insured status of the insured 
                depository institution of which the bank holding 
                company has control 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) for the insured 
                depository institution of which the bank holding 
                company has control under section 8(a)(2) of the 
                Federal Deposit Insurance Act (12 U.S.C. 1818(a)(2)).
    ``(f) Regulations.--Not later than 180 days after the date of 
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 Financial Stability 
Act of 2010 (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 
                nontrivial 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''; 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 
                nontrivial 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 Financial Stability Act of 2010 (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 
        Financial Stability Act of 2010 (12 U.S.C. 5365(b)(1)(A)) is 
        amended--
                    (A) in clause (iv), by striking ``and'' at the end;
                    (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.''.

SEC. 4. REPORTS.

    (a) Definitions.--In this section:
            (1) Covered bank holding company; financed emissions.--The 
        terms ``covered bank holding company'' and ``financed 
        emissions'' have the meanings given the terms in section 15 of 
        the Bank Holding Company Act of 1956, as added by section 2 of 
        this Act.
            (2) 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 not less than 1.5 degrees Celsius 
        compared to pre-industrial levels.
    (b) Initial Report.--Not later than 180 days after the date of 
enactment of this Act, the Board of Governors of the Federal Reserve 
System shall submit to Congress a report that--
            (1) identifies the 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 
enactment of this Act, and not less than once every 2 years thereafter, 
the Board of Governors of the Federal Reserve System shall submit to 
Congress a report that includes--
            (1) an analysis of the progress against aligning with 
        financed emissions targets;
            (2) the estimates described in subsection (b)(4);
            (3) an analysis of the progress made in the preceding 2 
        years toward an equitable transition to a zero financed 
        emissions economy; and
            (4) recommendations with respect to assistance Congress and 
        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 required under this section.
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