# Plain Language Summary: Climate Change Financial Risk Act of 2025

This bill requires the Federal Reserve to study and analyze how climate change poses financial risks to banks and the broader financial system. Right now, when the Federal Reserve conducts its annual "stress tests" on large banks—checking whether they have enough money to survive economic crises—it doesn't account for climate-related dangers. This bill says that needs to change. The Federal Reserve would have to develop new tools and scenarios to understand how extreme weather, rising sea levels, and the shift away from fossil fuels could threaten the banks' stability and the money people have deposited with them.

The bill creates a special advisory group of climate scientists and economists to help the Federal Reserve build these new analysis tools. This group would develop realistic climate scenarios—like what happens to the financial system if hurricanes become more frequent, or if fossil fuel companies suddenly lose value as the world switches to renewable energy. The group would then figure out what financial damage these scenarios could cause and share that information publicly so everyone can understand the risks. The bill also requires the Federal Reserve to help large financial companies (those with over $100 billion in assets) assess their own climate-related risks and to provide resources to smaller companies that want to do the same.

Essentially, this bill is about making sure banks and financial institutions aren't blindsided by climate-related disasters. By forcing the Federal Reserve to systematically study these risks now, the bill aims to prevent a financial crisis down the road where banks fail because they didn't prepare for climate impacts. For everyday people, this matters because the stability of banks directly affects whether your savings are safe and whether the financial system keeps functioning during tough times.

Climate Change Financial Risk Act of 2025

Casten, Sean

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.&nbsp;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.&nbsp;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.&nbsp;