[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 1217 Introduced in Senate (IS)]
<DOC>
117th CONGRESS
1st Session
S. 1217
To amend the Securities Exchange Act of 1934 to require certain
disclosures relating to climate change, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 19, 2021
Ms. Warren (for herself, Mr. Schatz, Mr. Whitehouse, Mr. Blumenthal,
Mrs. Feinstein, Mr. Van Hollen, Mr. Markey, Ms. Klobuchar, Ms. Smith,
Mrs. Gillibrand, Mr. Merkley, Mr. Bennet, Mr. Carper, Mr. Schumer, and
Mr. Booker) 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 certain
disclosures 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
2021''.
SEC. 2. 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 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;
(C) the transition impacts that result as the
global economy transitions to a clean and renewable
energy, low-emissions economy, including financial
impacts as climate change causes fossil fuel assets to
become 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; and
(D) actions by Federal, State, Tribal, and local
governments to limit the worst effects of climate
change by enacting policies that keep the global
average surface temperature rise 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 Securities and Exchange Commission (referred to in
this Act as 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. 3. DISCLOSURES RELATING TO CLIMATE CHANGE.
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) 1.5 degree scenario.--The term `1.5 degree
scenario' means a scenario that aligns with greenhouse
gas emissions pathways that aim for limiting global
warming to 1.5 degrees Celsius above pre-industrial
levels.
``(B) Appropriate climate principals.--The term
`appropriate climate principals' means--
``(i) the Administrator of the
Environmental Protection Agency;
``(ii) the Administrator of the National
Oceanic and Atmospheric Administration;
``(iii) the Director of the Office of
Management and Budget;
``(iv) the Secretary of the Interior;
``(v) the Secretary of Energy; and
``(vi) the head of any other Federal
agency, as determined appropriate by the
Commission.
``(C) Baseline scenario.--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 an increase in the global average
temperature of 1.5 degrees Celsius or more above pre-
industrial levels.
``(D) Carbon dioxide equivalent.--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 subsection.
``(E) Climate change.--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.
``(F) Commercial development of fossil fuels.--The
term `commercial development of fossil fuels'
includes--
``(i) exploration, extraction, processing,
exporting, transporting, refining, and any
other significant action with respect to oil,
natural gas, or coal, any byproduct thereof, or
any other solid or liquid hydrocarbons that are
commercially produced; or
``(ii) acquiring a license for any activity
described in clause (i).
``(G) Covered issuer.--The term `covered issuer'
means an issuer that is required to file an annual
report under subsection (a) or section 15(d).
``(H) Direct and indirect greenhouse gas
emissions.--The term `direct and indirect greenhouse
gas emissions' includes, with respect to a covered
issuer--
``(i) all direct greenhouse gas emissions
released by the covered issuer;
``(ii) all indirect greenhouse gas
emissions with respect to electricity, heat, or
steam purchased by the covered issuer;
``(iii) significant indirect emissions,
other than the emissions described in clause
(ii), emitted in the value chain of the covered
issuer; and
``(iv) 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.
``(I) Fossil fuel reserve.--The term `fossil fuel
reserve' has the meaning given the term `reserves'
under the final rule of the Commission titled
`Modernization of Oil and Gas Reporting' (74 Fed. Reg.
2158; published January 14, 2009).
``(J) Greenhouse gas.--The term `greenhouse gas'--
``(i) means carbon dioxide,
hydrofluorocarbons, methane, nitrous oxide,
perfluorocarbons, sulfur hexafluoride, nitrogen
triflouride, and chlorofluorocarbons;
``(ii) includes any other
anthropogenically-emitted gas that the
Administrator of the Environmental Protection
Agency determines, after notice and comment, to
contribute to climate change; and
``(iii) includes any other
anthropogenically-emitted gas that the
Intergovernmental Panel on Climate Change
determines to contribute to climate change.
``(K) Greenhouse gas emissions.--The term
`greenhouse gas emissions' means the emissions of
greenhouse gas, expressed in terms of metric tons of
carbon dioxide equivalent.
``(L) Physical risks.--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) financial risks to long-lived fixed
assets, locations, operations, or value chains
resulting from--
``(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; and
``(VIII) decreased availability of
fresh water; and
``(ii) any other financial risks to long-
lived fixed assets, locations, operations, or
value chains determined appropriate by the
Commission, in consultation with the
appropriate climate principals.
``(M) Social cost of carbon.--The term `social cost
of carbon' means the social cost of carbon, as
described in the technical support document entitled
`Technical Support Document: Technical Update of the
Social Cost of Carbon for Regulatory Impact Analysis
Under Executive Order 12866', published by the
Interagency Working Group on Social Cost of Greenhouse
Gases, United States Government, in August 2016 or any
successor or substantially related estimate of the
monetized damages associated with an incremental
increase in carbon dioxide emissions in a given year.
``(N) Transition risks.--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).
``(O) Value chain.--The term `value chain'--
``(i) means the total lifecycle of a
product or service, both before and after
production of the product or service, as
applicable; and
``(ii) may include the sourcing of
materials, production, transportation, and
disposal with respect to the product or service
described in clause (i).
``(2) Findings.--Congress finds that--
``(A) 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--
``(i) may reasonably expect to affect
shareholder decision making; and
``(ii) should regularly identify, evaluate,
and disclose; and
``(B) the disclosure of information described in
subparagraph (A) should--
``(i) identify, and evaluate--
``(I) material physical and
transition risks posed by climate
change; and
``(II) the potential financial
impact of the risks described in
subclause (I);
``(ii) detail any implications that the
risks described in clause (i)(I) have on
corporate strategy;
``(iii) detail any board-level oversight of
material climate-related risks and
opportunities;
``(iv) 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;
``(v) allow for tracking of performance
over time with respect to mitigating climate
risk exposure; and
``(vi) incorporate a price on greenhouse
gas emissions in financial analyses that
reflects, at minimum, the social cost of carbon
that is attributable to issuers.
``(3) 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 under this subsection, 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 any
strategy the covered issuer has for addressing climate
risks when differing climate scenarios are taken into
consideration; and
``(E) a description of how climate risk is
incorporated into the overall risk management strategy
of the covered issuer.
``(4) Rule of construction.--Nothing in paragraph (3) 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 such
paragraph.
``(5) Rulemaking.--The Commission, in consultation with the
appropriate climate principals, shall, not later than 2 years
after the date of enactment of this subsection, issue rules
with respect to the information that a covered issuer is
required to disclose pursuant to this subsection and such rules
shall--
``(A) establish climate-related risk disclosure
rules, which shall--
``(i) 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;
``(ii) 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) disaggregate, to the extent
practicable, 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;
``(iii) 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;
``(iv) specify requirements for, and the
disclosure of, input parameters, assumptions,
and analytical choices to be used in climate
scenario analyses required under subparagraph
(B)(ii), including--
``(I) present value discount rates;
and
``(II) time frames to consider,
including 5-, 10-, and 20-year time
frames; and
``(v) include reporting standards and
guidance with respect to the information
required under subparagraph (B)(iii);
``(B) require that a covered issuer, with respect
to a disclosure required under this subsection--
``(i) incorporate into such disclosure--
``(I) quantitative analysis to
support any qualitative statement made
by the covered issuer;
``(II) the rules established under
subparagraph (A);
``(III) industry-specific metrics
that comply with the requirements under
subparagraph (A)(i);
``(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 clause (ii); and
``(VI) the total cost attributable
to the direct and indirect greenhouse
gas emissions of the covered issuer,
using, at minimum, the social cost of
carbon;
``(ii) consider, when preparing any
qualitative or quantitative risk analysis
statement contained in the disclosure--
``(I) a baseline scenario that
includes physical risks with respect to
climate change;
``(II) a 1.5 degree scenario; and
``(III) any additional climate
analysis scenario considered
appropriate by the Commission, in
consultation with the appropriate
climate principals;
``(iii) 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--
``(aa) combustion;
``(bb) flared hydrocarbons;
``(cc) process emissions;
``(dd) directly vented
emissions;
``(ee) fugitive emissions
or leaks; and
``(ff) land use changes;
``(II) a description of--
``(aa) the sensitivity of
fossil fuel reserve levels to
future price projection
scenarios that incorporate the
social cost of carbon;
``(bb) the percentage of
the reserves of the covered
issuer that will be developed
under the scenarios established
in clause (ii), as well as a
forecast for the development
prospects of each reserve under
those scenarios;
``(cc) the potential amount
of direct and indirect
greenhouse gas emissions that
are embedded in proved and
probable reserves, with each
such calculation presented as a
total and in subdivided
categories by the type of
reserve;
``(dd) the methodology of
the covered issuer for
detecting and mitigating
fugitive methane emissions,
which shall include the
frequency with which applicable
assets of the covered issuer
are observed for methane leaks,
the processes and technology
that the covered issuer uses to
detect methane leaks, the
percentage of assets of the
covered issuer that the covered
issuer inspects under that
methodology, and quantitative
and time-bound reduction goals
of the issuer with respect to
methane leaks;
``(ee) the amount of water
that the covered issuer
withdraws from freshwater
sources for use and consumption
in operations of the covered
issuer; and
``(ff) the percentage of
the water described in item
(ee) that comes from regions of
water stress or that face
wastewater management
challenges; and
``(III) any other information that
the Commission determines is--
``(aa) necessary;
``(bb) appropriate to
safeguard the public interest;
or
``(cc) directed at ensuring
that investors are informed in
accordance with the findings
described in paragraph (2);
``(C) require that a covered issuer include in such
a disclosure 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--
``(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 paragraph (2); and
``(D) establish how and where the required
disclosures shall be addressed in the annual financial
filing of the covered issuer.
``(6) Formatting.--The Commission shall require covered
issuers to disclose information under this subsection in an
interactive data format and shall develop standards for such
format, 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
paragraph (2).
``(7) Periodic update of rules.--The Commission shall
periodically update the rules issued under this subsection.
``(8) Compilation of information disclosed.--The Commission
shall, to the maximum extent practicable, make a compilation of
the information disclosed by covered issuers under this
subsection publicly available on the website of the Commission
and update such compilation at least once each year.
``(9) Reports.--
``(A) Report to congress.--The Commission shall--
``(i) conduct an annual assessment
regarding the compliance of covered issuers
with the requirements of this subsection;
``(ii) submit to the appropriate
congressional committees a report that contains
the results of each assessment conducted under
clause (i); and
``(iii) make each report submitted under
clause (ii) accessible to the public.
``(B) GAO report.--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 this subsection.''.
SEC. 4. BACKSTOP.
If, 2 years after the date of enactment of this Act, the Commission
has not issued the rules required under subsection (s) of section 13 of
the Securities Exchange Act of 1934 (15 U.S.C. 78m), as added by
section 3 of this Act, and until the date on which the Commission
issues those rules, a covered issuer (as defined in such subsection
(s)) shall be deemed to be in compliance with such subsection (s) if
disclosures set forth in the annual report of that 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. 5. AUTHORIZATION OF APPROPRIATIONS.
There are authorized to be appropriated to the Commission such sums
as may be necessary to carry out this Act and the amendments made by
this Act.
<all>