Climate Change Financial Risk Act of 2025
Climate Change Financial Risk Act of 2025
Plain Language Summary
# Climate Change Financial Risk Act of 2025 - Summary **What the bill would do:** This bill would require the Federal Reserve to assess whether large financial companies (banks and non-bank financial firms) have enough financial reserves to survive losses caused by climate change. Every two years, these companies would be evaluated under different climate disaster scenarios to determine if they're adequately prepared. If a company fails the evaluation, it must create a plan to fix any weaknesses in its finances and capital reserves.
If the plan isn't approved by regulators, the company would face restrictions on distributing money to shareholders. **Who it affects:** Primarily large banks and major financial institutions with significant assets. The bill would impact how these institutions manage risk and plan for their finances going forward. **Key provisions:** The bill creates a new technical group to develop climate risk scenarios for testing, requires companies to develop specific plans to address identified vulnerabilities, and gives regulators the power to restrict dividend payments and stock buybacks if companies don't adequately prepare for climate-related financial risks. **Current status:** The bill is currently in committee (House Financial Services Committee) and has not yet been voted on by Congress.
CRS Official Summary
Climate Change Financial Risk Act of 2025This bill addresses climate change risk and its potential impact on the financial system.The Federal Reserve Board must develop financial risk analyses relating to climate change for certain large nonbank financial companies and bank holding companies. Specifically, these entities must be evaluated every two years on whether they have the capital necessary to absorb financial losses that would arise under several different climate change risk scenarios. In response to the results of the evaluation, entities must develop and submit for approval a climate risk resolution plan. The plan must include a capital policy with respect to climate risk planning and targets to remedy identified vulnerabilities. If the plan is not approved, the entity’s ability to make capital distributions is restricted. The bill also establishes the Climate Risk Scenario Technical Development Group to provide recommendations to the board regarding climate change risk scenarios, and determine the financial and economic risks of these scenarios.The board must develop a survey to assess (1) the ability of other large financial institutions to withstand each scenario, (2) which surveyed entities have activities in geographical areas or industries that are significantly exposed to the impacts of climate change, and (3) how these surveyed entities plan to adapt to risks presented in each scenario.
Latest Action
Referred to the Committee on Financial Services, and in addition to the Committee on Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.