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Van Hollen Joins Casten, Smith on Legislation to Mitigate Climate Risk in US Financial System

Today, U.S. Senator Chris Van Hollen (D-Md.) joined Senator Tina Smith (D-Minn.) and Representative Sean Casten (D-Ill.-06) in introducing the Addressing Climate Financial Risk Act, legislation to improve the ability of federal regulators to understand and mitigate risks from climate change within our financial system.

Climate change is increasing the frequency and severity of wildfires, flooding, droughts, and other natural disasters and extreme weather events. The damage and risks generated by these events – in addition to changes needed to transition to a cleaner economy – threaten to severely disrupt real estate values across the country, reshape entire sectors of the economy, and make homeowners’ insurance increasingly unaffordable. At the same time, the Trump Administration is dismantling the progress made under the Biden Administration, which means our regulators are less informed, equipped, and prepared to deal with current and future climate-driven financial crises. Climate change threatens the stability of the U.S. financial system, which is why it is so important to ensure financial regulators approach it in a comprehensive way.

In addition to Senator Van Hollen, the bill is cosponsored by Senators Jeff Merkley (D-Ore.), Elizabeth Warren (D-Mass.), Martin Heinrich (D-N.M.), and Alex Padilla (D-Calif.).

In the House, the bill is cosponsored by Representatives Kathy Castor (D-Fla.-14), Ted Lieu (D-Calif.-36), Kevin Mullin (D-Calif.-15), Suzanne Bonamici (D-Ore.-01), Yassamin Ansari (D-Ariz.-03), Jared Huffman (I-Calif.-02), Melanie Stansbury (D-N.M.-01), Nydia Velázquez (D-N.Y.-07), Julia Brownley (D-Calif.-26), Dwight Evans (D-Pa.-03), Dave Min (D-Calif.-47), and Dan Goldman (D-N.Y.-10).

Specifically, the Addressing Climate Financial Risk Act would:

  1. Re-establish two climate-focused committees within the Financial Stability Oversight Council (FSOC), which will advise and inform the Council on best practices in identifying and mitigating climate financial risk. FSOC is composed of the heads of our banking, housing, securities, and insurance regulators and has the authority to address risks that threaten the stability of the U.S. financial system.
  2. Require FSOC to publish an updated report on climate financial risk, following the Biden Administration’s important 2021 report.
  3. Direct banking regulators to update non-binding supervisory guidance to include climate financial risk, which will help banks with more than $50 billion in assets better manage the short and long-term risks associated with climate change.
  4. Codify FSOC’s 2023 proposal to include climate financial risk in its analysis under FSOC’s process for designating firms as “systemically important”, allowing FSOC to use this underutilized tool to address threats posed by climate change.
  5. Direct the Federal Insurance Office (FIO) to publish an updated report on climate financial risk and continue its climate-related data call for 2023, 2024, and onward. For calendar years 2018-2022, FIO conducted a first-of-its-kind data collection to better understand how climate change was affecting homeowners’ insurance affordability and availability.
  6. Express the sense of Congress that our financial regulators should rejoin international climate organizations, including the Network for Greening the Financial System (NGFS).

The full text of the legislation can be found here.