Addressing Climate Financial Risk Act of 2026
- Bill Number
- S. 3711
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 2
- Policy Area
- Finance and Financial Sector
- Status
- Introduced
- Latest Action
- 2026-01-28: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
- Last Updated
- 2026-02-20T16:55:47Z
AI-Generated Summary
Purpose of the Legislation
The Addressing Climate Financial Risk Act of 2026 aims to integrate climate-related risks into the U.S. financial regulatory framework. It establishes specialized committees within the Financial Stability Oversight Council (FSOC) to identify, assess, and mitigate these risks, ensuring the financial system is more resilient to climate change impacts like extreme weather or shifts in economic conditions tied to environmental changes.
Key Provisions
- Establishment of Committees:
- Creates the Climate Financial Risk Committee within FSOC, composed of staff from FSOC member agencies (e.g., Treasury, Federal Reserve), led by the Deputy Assistant Secretary. Duties include prioritizing climate risk assessments, sharing information across agencies, compiling data with the Office of Financial Research, and updating FSOC on progress in areas like regulatory programs, data improvement, disclosures, and risk evaluations.
- Establishes the Advisory Committee on Climate Risk (up to 30 members), including climate scientists (appointed by Energy, EPA, NSF), climate economics experts (appointed by FSOC, covering insurance, banking, etc.), representatives from research institutions, consumer/labor groups, investor networks, and other stakeholders (excluding oil/gas industry). It meets bimonthly to advise on risks and meets for 3-year staggered terms; removal requires a 2/3 vote by FSOC agency heads.
- Both committees cannot be terminated without congressional action; FSOC must consult the advisory committee and include climate risks in annual reports to Congress.
- Annual Reporting Requirements:
- FSOC must publish an annual report (starting 270 days after enactment) assessing climate risks' impact on U.S. financial stability, agency expertise, data quality/gaps, insurance trends' effects on credit/housing, risk management by large banks/nonbanks, coordination (domestic and international), disclosure comparisons, and other key areas. It includes recommendations for regulators and Congress.
- Updates to Supervisory Guidance:
- Federal banking agencies (e.g., FDIC, OCC) and the National Credit Union Administration must update guidance to address climate risks (credit, liquidity, market, operational, reputational) for institutions with over $50 billion in assets. The Financial Institutions Examination Council coordinates this and shares with state regulators.
- Nonbank Financial Institution Designations:
- FSOC must revise regulations to factor in climate risks when designating nonbank companies as systemically important financial institutions (SIFIs), which could subject them to enhanced oversight.
- Federal Insurance Office (FIO) Actions:
- FIO must issue a report within 1 year assessing climate risks to insurance, updating a 2023 report's recommendations, and suggesting regulatory improvements.
- FIO must collect and report (starting within 1 year, annually thereafter) granular homeowners insurance data (e.g., premiums, claims, non-renewals by ZIP code) for 2023–2024 and future years, in consultation with state commissioners. Data is shared with Congress/state regulators upon request, without personal information.
- Sense of Congress on Global Coordination:
- Encourages U.S. agencies (e.g., Treasury, FIO) to join international groups like the Network for Greening the Financial System and the Basel Committee's Task Force on Climate-Related Financial Risks, and to collaborate globally consistent with U.S. law.
Significant Changes to Existing Law
- Amends the Financial Stability Act of 2010 (part of Dodd-Frank) by adding new sections (121A–121C) for the committees and reporting, with conforming updates to the table of contents.
- Mandates explicit inclusion of climate risks in banking supervisory guidance, previously not required at this level of detail.
- Revises FSOC's nonbank SIFI designation process (12 CFR Part 1310, Subpart B) to incorporate climate factors, expanding beyond traditional metrics like size and interconnectedness.
- Introduces new FIO data collection authority under existing law (31 U.S.C. § 313), focusing on climate-specific insurance data, which builds on but goes beyond prior voluntary or limited efforts.
Potential Impacts
- Government Agencies: Increases workload for FSOC, banking agencies, FIO, and others through new committees, data collection, guidance updates, and reporting; promotes inter-agency coordination and expertise-building on climate issues.
- Citizens: Could improve financial stability by addressing climate risks in lending, insurance, and investments, potentially stabilizing housing markets and reducing costs from unmitigated risks (e.g., higher insurance premiums in disaster-prone areas); enhances transparency via public reports.
- International Relations: Encourages U.S. alignment with global standards on climate disclosures and risk management, potentially strengthening cooperation with bodies like the Basel Committee, but maintains U.S. legal sovereignty.
Main Stakeholders Affected
- Financial Regulators: FSOC members (e.g., Treasury, Federal Reserve, SEC), banking agencies, FIO, state insurance commissioners—gain new duties but also tools for risk assessment.
- Financial Institutions: Large banks (> $50B assets), nonbanks, insurers—face updated guidance, potential SIFI designations, and data reporting, requiring better climate risk management.
- Experts and Advocacy Groups: Climate scientists, economists, consumer/labor advocates, investor networks—participate in advisory roles, influencing policy.
- Consumers and Businesses: Homeowners and borrowers may see impacts on insurance availability/affordability; broader economy benefits from reduced systemic risks.
- Excluded Groups: Oil/gas industry stakeholders are barred from advisory committee participation.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens FSOC's mandate under Dodd-Frank without altering core authorities; new data collection uses existing statutory powers, but could raise privacy concerns (mitigated by no personal data inclusion). Committee protections (e.g., congressional termination only) limit executive discretion.
- Constitutional: No apparent challenges; aligns with Congress's commerce clause authority over financial regulation and promotes informed oversight without infringing on states (via coordination requirements).
- Political: Signals bipartisan potential in climate-finance intersection (introduced by Democrats but focuses on stability, not emissions mandates); may spark debate on regulatory burden vs. risk prevention, especially in insurance markets amid rising climate events. Promotes international engagement without binding treaties.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (5)
Sen. Merkley, Jeff [D-OR], Sen. Warren, Elizabeth [D-MA], Sen. Heinrich, Martin [D-NM], Sen. Van Hollen, Chris [D-MD], Sen. Padilla, Alex [D-CA]
Recent Actions
- 2026-01-28: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
- 2026-01-28: Introduced in Senate
Bill Versions
- Addressing Climate Financial Risk Act of 2026 — issued 2026-01-28 — PDF (13 pages)