# Climate Change Financial Risk Act of 2021

This bill requires the Federal Reserve to analyze how climate change could threaten the stability of America's financial system and the banks that hold people's money. Right now, when the Federal Reserve tests whether big banks are financially healthy enough to survive economic crises, they don't consider climate risks at all. This bill changes that.

The bill creates a team of climate scientists and economists who will develop realistic scenarios showing what could happen to the economy under different climate futures—one where global temperatures rise 1.5 degrees, another at 2 degrees, and a third based on what's actually happening with current policies. These scenarios will look at two types of climate risks: physical risks (like hurricanes destroying property and infrastructure) and transition risks (like fossil fuel companies losing value as the world shifts to clean energy). The Federal Reserve will then use these scenarios to stress-test the biggest banks and financial companies, similar to how they already test whether banks can survive recessions. This means regulators will start checking whether major financial institutions are prepared for climate-related shocks that could ripple through the economy.

The bill also requires the Federal Reserve to share its climate risk analysis publicly and help large financial companies assess their own climate vulnerabilities. This affects anyone with money in banks or retirement accounts, since a financial system weakened by climate risks could ultimately impact savings and lending. It also affects investors and companies in fossil fuel industries, since the analysis will likely highlight the financial dangers they face as the world transitions away from oil and coal. Essentially, the bill treats climate change as a serious financial stability issue rather than just an environmental concern, bringing it into the same risk-management framework the government already uses to protect the banking system.

Climate Change Financial Risk Act of 2021

Climate Change Financial Risk Act of 2021 This 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 specified large nonbank financial companies and bank holding companies. Specifically, these entities will 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. The bill also establishes the Climate Risk Scenario Technical Development Group to provide recommendations to the board regarding such climate change risk scenarios, and determine the financial and economic risks of these scenarios. The Financial Stability Oversight Council of the Department of the Treasury must establish a committee to assist it in identifying risks and responding to threats to the financial system as a result of climate change.