Large bank holding companies would plan to cut financing-linked emissions

Covered bank holding companies would have to file emissions plans and carry them out if the Federal Reserve accepts them. Companies with at least $50 billion in consolidated assets would be covered. Their covered emissions are greenhouse gases tied to investments and financial services for other companies or projects. The baseline year would have to be no later than two years after enactment. The Federal Reserve would have to reject plans that miss the bill’s science-based targets without offsets or rely on unproven emissions technology, then require revisions. The first plan would be due no later than 210 days after enactment, with later plans required at least once every two years. The Federal Reserve would have 180 days after receiving each plan to decide.

The plans would have to call for stopping specified fossil-fuel projects and ending financing and help arranging investments for covered fossil fuels and forest-risk goods. Fossil-fuel companies receiving this support must earn at least 15% of revenue from listed oil, gas, or coal work; that threshold does not apply to the regulated banks. New or expanded projects increase reserves, certain transport or processing capacity, or utility-scale fuel burning. Forest-risk goods must significantly drive natural-forest conversion. Plans could not use carbon offsets. Proven carbon-removal technology could be included only if it does not harm low-income, minority, or Indigenous communities. Plans would have to prioritize withdrawing funding from companies and projects that disproportionately harm low-income and minority communities, lending for worker severance and retraining, and stronger environmental and community checks. The Federal Reserve could require other plan elements it considers necessary to protect U.S. financial stability. Plans would have to call for stopping new or expanded projects no later than 60 days after enactment, ending thermal-coal financing and help arranging investments immediately, and ending all covered fossil-fuel financing and investment help by January 1, 2035. No deadline is stated for forest-risk goods.

The Federal Reserve would have to impose penalties and require asset sales when a covered company fails to file a required plan or meet its requirements. These measures would apply to a covered company that does not submit a required plan or meet the requirements in its plan. The Federal Reserve would have to notify the FDIC board. The FDIC board could end deposit insurance for a bank controlled by the notified holding company or use other corrective powers. A subsidiary that contributed to the holding company’s failure would be an additional basis for action.

The Financial Stability Oversight Council would consider finance-related emissions in nonbank supervision decisions and could recommend standards for selling investments to reduce them. Required federal standards would include emissions-reduction plans. The decision factor would apply to nonbank financial companies. The standards provisions would cover supervised nonbanks and certain bank holding companies.

The Federal Reserve would have to report to Congress and collect needed data from bank holding companies. Reports would cover current emissions, progress toward targets and a fair transition, regulatory and data gaps, effects on workers and communities, ways to ease economic harm, and recommendations for government help. The initial report and first progress report would each be due within 180 days after enactment. Progress reports would then be due at least once every two years.