[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 2075 Introduced in Senate (IS)]
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116th CONGRESS
1st Session
S. 2075
To amend the Securities Exchange Act of 1934 to require issuers to
disclose certain activities relating to climate change, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 10, 2019
Ms. Warren (for herself, Mr. Schatz, Mr. Whitehouse, Mr. Van Hollen,
Ms. Klobuchar, Mrs. Gillibrand, Mr. Bennet, Mr. Blumenthal, Mr. Booker,
Mr. Markey, Mr. Merkley, Ms. Harris, Ms. Smith, Mrs. Feinstein, Mr.
Schumer, and Mr. Carper) 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 issuers to
disclose certain activities 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
2019''.
SEC. 2. DEFINITIONS.
In this Act--
(1) the terms ``appropriate climate principals'', ``climate
change'', ``covered issuer'', ``physical risks'', and
``transition risks'' have the meanings given those terms in
subsection (s) of section 13 of the Securities Exchange Act of
1934 (15 U.S.C. 78m), as added by section 5;
(2) the term ``appropriate congressional committees''
means--
(A) the Committee on Banking, Housing, and Urban
Affairs of the Senate; and
(B) the Committee on Financial Services of the
House of Representatives;
(3) 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--
(A) an increase in the global average temperature
of 1.5 degrees Celsius or more above pre-industrial
levels; and
(B) the realization of physical risks relating to
global climate change;
(4) 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 Act;
(5) the term ``commercial development of fossil fuels''
includes--
(A) exploration, extraction, processing, exporting,
transporting, and any other significant action with
respect to oil, natural gas, coal, or any byproduct
thereof; and
(B) acquiring a license for any activity described
in subparagraph (A);
(6) the term ``Commission'' means the Securities and
Exchange Commission;
(7) the term ``direct and indirect greenhouse gas
emissions'' includes, with respect to a covered issuer--
(A) all direct greenhouse gas emissions released by
the covered issuer;
(B) all indirect greenhouse gas emissions with
respect to electricity, heat, or steam purchased by the
covered issuer;
(C) significant indirect emissions, other than the
emissions described in subparagraph (B), that occur in
the value chain of the covered issuer; and
(D) 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;
(8) the term ``fossil fuel reserves'' means all producing
assets, proved reserves, unproved resources, and any other
ownership stake in sources of fossil fuels;
(9) the term ``greenhouse gas''--
(A) means carbon dioxide, hydrofluorocarbons,
methane, nitrous oxide, perfluorocarbons, sulfur
hexafluoride, nitrogen triflouride, and
chlorofluorocarbons; and
(B) includes any other anthropogenically emitted
gas or particulate that the Administrator of the
Environmental Protection Agency determines, after
notice and comment, to contribute to climate change;
(10) the term ``greenhouse gas emissions'' means the
emissions of greenhouse gas, expressed in terms of metric tons
of carbon dioxide equivalent;
(11) the term ``social cost of carbon'' means the monetized
present value, discounted at a 3 percent or lower discount
rate, in dollars, per metric ton of carbon dioxide (or carbon
dioxide equivalent), of the net global costs over 300 years
caused by the emission of carbon dioxide (or carbon dioxide
equivalent, as applicable) that result from--
(A) changes in net agricultural productivity;
(B) decreases in capital and labor productivity;
(C) effects on human health;
(D) property damage from increased sea-level rise,
flooding, wildfires, and frequency and severity of
extreme weather events;
(E) the value of ecosystem services; and
(F) any other type of economic, social, political,
or natural disruption;
(12) the term ``value chain''--
(A) means the total lifecycle of a product or
service, both before and after production of the
product or service, as applicable; and
(B) may include the sourcing of materials,
production, and disposal with respect to the product or
service described in subparagraph (A);
(13) the term ``well below 1.5 degrees scenario'' means a
widely recognized, publicly available analysis scenario in
which human interventions to combat global climate change are
likely to prevent the global average temperature from reaching
1.5 degrees Celsius above pre-industrial levels; and
(14) the term ``1.5 degree scenario'' means a widely
recognized, publicly available analysis scenario in which human
interventions to combat global climate change are likely to
prevent the global average temperature from reaching 1.5
degrees Celsius above pre-industrial levels.
SEC. 3. 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 multiple
channels of 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; and
(C) the transition impacts that result as the
global economy transitions to a clean and renewable
energy, low-emissions economy, including financial
impacts as fossil fuel assets risk becoming 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;
(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 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. 4. FINDINGS.
Congress finds that--
(1) 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--
(A) may reasonably expect to affect shareholder
decision making; and
(B) should regularly identify, evaluate, and
disclose; and
(2) the disclosure of information described in paragraph
(1) should--
(A) identify, and evaluate--
(i) material physical and transition risks
posed by climate change; and
(ii) the potential financial impact of
risks described in clause (i);
(B) detail any implications that the risks
described in subparagraph (A)(i) have on corporate
strategy;
(C) detail any board-level oversight of material
climate-related risks and opportunities;
(D) 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;
(E) allow for tracking of performance over time
with respect to mitigating climate risk exposure; and
(F) incorporate a price on greenhouse gas emissions
in financial analyses that reflects, at minimum, the
social cost of carbon that is attributable to issuers.
SEC. 5. DISCLOSURES RELATING TO CLIMATE CHANGE.
(a) In General.--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) the term `appropriate climate principals'
means--
``(i) the Administrator of the
Environmental Protection Agency;
``(ii) the Secretary of Energy;
``(iii) the Administrator of the National
Oceanic and Atmospheric Administration;
``(iv) the Director of the Office of
Management and Budget; and
``(v) the head of any other Federal agency
determined appropriate by the Commission;
``(B) 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;
``(C) the term `covered issuer' means an issuer
that is required to file an annual report under
subsection (a) or section 15(d);
``(D) 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) 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;
``(viii) decreased availability of fresh
water; and
``(ix) any other financial risks to long-
lived fixed assets, locations, operations, or
value chains determined appropriate by the
Commission, in consultation with appropriate
climate principals;
``(E) 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);
``(2) 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 pursuant to the Climate Risk Disclosure Act of
2019, 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 the
strategy of the covered issuer for addressing climate
risks, taking into account different climate scenarios;
and
``(E) a description of how climate risk is
incorporated into the overall risk management strategy
of the covered issuer.
``(3) Rule of construction.--Nothing in paragraph (2) 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 that
paragraph.''.
SEC. 6. RULEMAKING.
(a) Climate Risk Disclosure Rules.--Not later than 2 years after
the date of enactment of this Act, the Commission, in consultation with
the appropriate climate principals, shall issue rules with respect to
the information that a covered issuer is required to disclose pursuant
to subsection (s) of section 13 of the Securities Exchange Act of 1934
(15 U.S.C. 78m), as added by section 5, which shall--
(1) establish, in consultation with the appropriate climate
principals, climate-related risk disclosure guidance, which
shall--
(A) 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;
(B) 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) separate, to the extent practicable,
the 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;
(C) 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;
(D) establish a minimum social cost of carbon,
which--
(i) shall be considered a minimum price
with respect to costs associated with carbon
emissions;
(ii) a covered issuer shall use in
preparing climate-related disclosure
statements; and
(iii) the Commission shall make publicly
available, including all assumptions and
methods used in the calculations;
(E) not preclude a covered issuer from using and
disclosing, as compared with the price established
under subparagraph (D), a higher price of greenhouse
gas emissions;
(F) specify requirements for, and the disclosure
of, input parameters, assumptions, and analytical
choices to be used in climate scenario analyses
required under paragraph (2)(A), including--
(i) present value discount rates;
(ii) time frames to consider, including 5-,
10-, and 20-year time frames; and
(iii) the minimum pricing of greenhouse gas
emissions, as established under subparagraph
(D) and subject to subparagraph (E); and
(G) include, after consultation with the
Administrator of the Environmental Protection Agency,
the Secretary of Energy, the Secretary of the Interior,
the Secretary of Agriculture, the Secretary of
Transportation, the Chair of the Council on
Environmental Quality, and the Director of the Office
of Science and Technology Policy documentation
standards and guidance with respect to the information
required under paragraph (2)(C);
(2) require that a covered issuer, with respect to a
disclosure required under subsection (s) of section 13 of the
Securities Exchange Act of 1934 (15 U.S.C. 78m), as added by
section 5--
(A) incorporate into the disclosure--
(i) quantitative analysis to support any
qualitative statement made by the covered
issuer;
(ii) the guidance established under
paragraph (1);
(iii) industry-specific metrics that comply
with the requirements under paragraph (1)(A);
(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 paragraph (1)(B);
(vi) the total cost of carbon attributable
to the direct and indirect greenhouse gas
emissions of the covered issuer, using, at
minimum, the social cost of carbon; and
(vii) 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--
(viii) necessary;
(ix) appropriate to safeguard the public
interest; or
(x) directed at ensuring that investors are
informed in accordance with the findings
described in section 4;
(B) consider, when preparing any qualitative or
quantitative risk analysis statement contained in the
disclosure--
(i) a baseline scenario that includes
physical impacts of climate change;
(ii) a well below 1.5 degrees scenario; and
(iii) any additional climate analysis
scenario considered appropriate by the
Commission, in consultation with the
appropriate climate principals; and
(C) 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--
(I) combustion;
(II) flared hydrocarbons;
(III) process emissions;
(IV) directly vented emissions;
(V) fugitive emissions or leaks;
and
(VI) land use changes;
(ii) a description of--
(I) the sensitivity of fossil fuel
reserves levels to future price
projection scenarios that incorporate
the social cost of carbon into
hydrocarbon pricing;
(II) the percentage of the reserves
of the covered issuer that will be
developed under the scenarios
established in subparagraph (B), as
well as a forecast for the development
prospects of each reserve under the
scenarios established in subparagraph
(B);
(III) the potential amount of
direct and indirect greenhouse gas
emissions that are embedded in proved
and probable hydrocarbon reserves, with
each such calculation presented as a
total and in subdivided categories by
the type of reserve;
(IV) the methodology of the covered
issuer for detecting and mitigating
fugitive methane emissions, which shall
include--
(aa) the frequency with
which applicable assets of the
covered issuer are observed for
methane leaks;
(bb) the processes and
technology that the covered
issuer uses to detect methane
leaks;
(cc) the percentage of
assets of the covered issuer
that the covered issuer
inspects under that
methodology; and
(dd) quantitative and time-
bound reduction goals of the
covered issuer with respect to
methane leaks;
(V) the amount of water that the
covered issuer withdraws from
freshwater sources for use and
consumption in operations of the
covered issuer; and
(VI) the percentage of the water
described in subclause (V) that comes
from regions of water stress or that
face wastewater management challenges;
and
(iii) any other information that the
Commission, in consultation with the
appropriate climate principals and the
Administrator of the Environmental Protection
Agency, the Secretary of Energy, the Secretary
of the Interior, and the Secretary of
Agriculture 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 section
4; and
(3) establish how and where the required disclosures shall
be addressed in the annual financial filing of a covered
issuer.
(b) Formatting.--The Commission shall--
(1) require covered issuers to disclose information in an
interactive data format; and
(2) develop standards for the format described in paragraph
(1), 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
section 4.
(c) Periodic Update of Rules.--The Commission shall periodically
update the rules issued under this section to ensure that the rules
further the findings described in section 4(2).
SEC. 7. COMPILATION OF INFORMATION DISCLOSED.
The Commission shall, to the maximum extent practicable--
(1) make a compilation of the information disclosed by
issuers pursuant to subsection (s) of section 13 of the
Securities Exchange Act of 1934 (15 U.S.C. 78m), as added by
section 5, publicly available on the website of the Commission;
and
(2) update the compilation described in paragraph (1) not
less frequently than once each year.
SEC. 8. BACKSTOP.
If, 2 years after the date of enactment of this Act, the Commission
has not issued rules pursuant to section 6, and until those rules are
issued, a covered issuer shall be deemed in compliance with subsection
(s) of section 13 of the Securities Exchange Act of 1934 (15 U.S.C.
78m), as added by section 5, if disclosures set forth in the annual
report of the 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. 9. REPORTS.
(a) Securities and Exchange Commission.--The Commission shall--
(1) conduct an annual assessment regarding the compliance
of covered issuers with the requirements of subsection (s) of
section 13 of the Securities Exchange Act of 1934 (15 U.S.C.
78m), as added by section 5;
(2) submit to the appropriate congressional committees a
report that contains the results of each assessment conducted
under paragraph (1); and
(3) make each report submitted under paragraph (2)
accessible to the public.
(b) Government Accountability Office.--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 subsection (s) of section 13
of the Securities Exchange Act of 1934 (15 U.S.C. 78m), as added by
section 5.
SEC. 10. SEVERABILITY.
If any provision of this Act, an amendment made by this Act, or the
application of this Act (or an amendment made by this Act) to any
person or circumstance is held to be invalid, that holding shall have
no effect with respect to--
(1) the remainder of this Act; and
(2) the application of the provision or amendment, as
applicable, to any other person or circumstance.
SEC. 11. AUTHORIZATION OF APPROPRIATIONS.
There are authorized to be appropriated to the Commission such sums
as may be necessary to carry out this Act.
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