# The Fossil Free Financing Act of 2023: What It Actually Does

This bill would require the nation's largest banks to dramatically reduce the greenhouse gas emissions they finance through their lending and investment activities. Specifically, it targets the biggest bank holding companies—those with at least $50 billion in assets—and tells them to stop funding fossil fuel projects and work toward zero emissions from all their financing by 2050.

Here's what that means in practical terms: When a bank lends money to an oil company to drill for oil, or finances a coal plant, or invests in a natural gas pipeline, those emissions count as "financed emissions" under this bill. The law would require large banks to measure these emissions and create plans to reduce them by 50% by 2030, stop all new fossil fuel projects by 2023, end coal financing by 2025, and completely stop fossil fuel financing by 2030. Banks couldn't use carbon offsets—the accounting trick where companies claim to cancel out emissions elsewhere—to meet these targets. The Federal Reserve would review each bank's plan and could reject it if it doesn't align with climate science.

If banks don't comply, they face serious consequences. The Federal Reserve could impose financial penalties, force them to sell off assets, and even revoke their deposit insurance, which would essentially shut them down. The bill also expands the definition of financial risk to include whether a company contributes significantly to climate change, meaning the government could designate other large financial firms for stricter oversight based on their climate impact.

The bill includes provisions aimed at protecting workers and communities. Banks would need to prioritize withdrawing funding from companies that harm low-income and minority neighborhoods, and they'd be encouraged to help finance job retraining for workers affected by the transition away from fossil fuels. The Federal Reserve would also have to report to Congress on how this transition affects different communities and what support they might need.

Fossil Free Financing Act of 2023

Fossil Free Financing Act of 2023 This bill requires large bank holding companies to set forth plans to reduce and ultimately eliminate the financing of activities that contribute to greenhouse gas emissions and deforestation. Specifically, the bill prohibits the financing of (1) new or expanded fossil fuel projects immediately, (2) thermal coal by 2025, and (3) all fossil fuel projects by 2030. Further, the Financial Stability Oversight Council must consider the activities of certain bank holding companies and nonbank financial companies that contribute to emissions as part of the prudential supervision process. The Board of Governors of the Federal Reserve System must report on financed emissions in the financial system, the estimated emissions to meet science-based emissions targets, and recommendations for addressing regulatory gaps in reducing such emissions that cannot be addressed by the board.