Alignment of financial sector emissions with science-based targets

The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended by adding at the end the following: 15. Alignment of financial sector emissions with science-based targets (a) Definitions In this section: (1) Carbon offsets The term carbon offsets means an emissions reduction or removal of greenhouse gases in a manner calculated and traced for the purpose of offsetting an entity’s greenhouse gas emissions. (2) Covered bank holding company The term covered bank holding company means a bank holding company with total consolidated assets not less than $50,000,000,000. (3) Deforestation risk commodities The term deforestation risk commodities means globally traded goods and raw materials— (A) that originate from natural forest ecosystems— (i) directly from within forest areas; or (ii) from areas previously under forest cover; and (B) the extraction or production of which contributes significantly to the conversion of natural forest to agriculture, tree plantation, or other nonforest land use. (4) Financial sector emissions The term financial sector emissions means, with respect to a covered bank holding company, and any nonbank financial company supervised by the Board in accordance with section 113 of the Financial Stability Act of 2010 (12 U.S.C. 5323), the greenhouse gas emissions of such company, expressed in metric tons of carbon dioxide equivalent, attributable to investment in, or the providing of financial services to, another company or project of another company, including the following: (A) Financed emissions Emissions from financing activities, including— (i) on-balance sheet listed and unlisted corporate bonds and on-balance sheet listed equity that are traded on a market and are for general corporate purposes; (ii) business loans and equity investments in private companies; (iii) project finance and investment such as on-balance sheet loans or equities to projects or activities that are designated for specific purposes; (iv) securitized and structured products that are backed by identifiable loans, leases, or other income-generating assets; (v) sovereign bonds and loans issued in domestic or foreign currencies; and (vi) sub-sovereign bonds and loans issued by public authorities below the national level such as states, provinces, regions, cities, or municipalities, in either domestic or foreign currency. (B) Facilitated emissions Emissions from facilitating activities, including the following: (i) Facilitated new issuance of public debt, including all types of bonds issued for general purposes. (ii) Facilitated new issuance of public equity, including common stock (such as initial public offerings and follow-on issuances) and preferred shares. (iii) Facilitated equity investments in private companies (including private placements). (iv) Facilitated debt investments in private companies (including private credit). (v) A loan made available by 2 or more providers under a common loan agreement. (5) Fossil fuel facilitation The term fossil fuel facilitation means, with respect to a covered bank holding company, facilitating the investment in— (A) a company that derives not less than 15 percent revenue from exploration, extraction, processing, exporting, transporting, and any other significant action with respect to oil, natural gas, coal, or any byproduct thereof; or (B) a fossil fuel project. (6) Fossil fuel financing The term fossil fuel financing means, with respect to a covered bank holding company, investment in— (A) a company that derives not less than 15 percent revenue from exploration, extraction, processing, exporting, transporting, and any other significant action with respect to oil, natural gas, coal, or any byproduct thereof; or (B) a fossil fuel project. (7) Fossil fuel project The term fossil fuel project means a project intended to— (A) facilitate or expand exploration, extraction, processing, exporting, transporting, or any other significant action with respect to oil, natural gas, coal; or (B) construct any infrastructure related to the activities described in subparagraph (A), such as wells, pipelines, terminals, refineries, or utility-sale generation facilities. (8) Greenhouse gas The term greenhouse gas means carbon dioxide, methane, nitrous oxide, nitrogen trifluoride, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. (9) Natural forest The term natural forest means a natural arboreal ecosystem that— (A) has a species composition a significant percentage of which is native species; and (B) contains a tree canopy cover of more than 10 percent over an area of not less than 0.5 hectares. (10) New or expanded fossil fuel project The term new or expanded fossil fuel project means a fossil fuel project that would increase the— (A) level of proven or developable oil, natural gas, or coal reserves; (B) midstream throughput of pipelines, terminals, or refineries; or (C) combustion of oil, natural gas, or coal for utility-scale electricity generation. (b) Requirements Not later than 210 days after the date of enactment of this section, and not less than once every 2 years thereafter, a covered bank holding company shall— (1) submit to the Board an emission reduction plan for reducing emissions in accordance with this section; and (2) if the plan is accepted under subsection (d), implement such plan. (c) Elements of plan Each plan required under subsection (b)(1)— (1) shall include— (A) a selection of an emissions baseline year that is not later than 2 years after the date of enactment of this section; (B) a plan for the covered bank holding company to reach zero financial sector emissions not later than January 1, 2050; (C) a plan to reduce the financial sector emissions of the bank holding company by 50 percent below the emissions baseline year not later than January 1, 2035; (D) a plan to discontinue new or expanded fossil fuel projects not later than 60 days after the date of enactment of this section; (E) a plan for the covered bank holding company to immediately discontinue thermal coal financing and facilitation; (F) a plan for the covered bank holding company to discontinue all fossil fuel financing and facilitation not later than January 1, 2035; (G) a plan for the covered bank holding company to eliminate financing and facilitation of deforestation risk commodities; and (H) such other requirements as the Board determines is necessary to protect the financial stability of the United States; (2) may not include carbon offsets; (3) may include proven negative carbon emission technologies to meet the requirements under paragraph (1)(A) if the technologies do not negatively impact low-income, minority, or indigenous communities; (4) shall prioritize— (A) the covered bank holding company withdrawing funding from companies and projects that have a disproportionately negative impact on the health and well-being of low-income and minority communities; (B) lending to companies for purposes of carrying out severance, retraining, and other benefits to workers impacted by the transition to zero financial sector emissions; and (C) enhanced due diligence about the impacts of financing on biodiversity and community and the framework of the client for and track record in— (i) managing greenhouse gas and other emissions; and (ii) compliance with regulations and international standards. (d) Consideration of plan Not later than 180 days after the date on which the Board receives a plan submitted under subsection (b)(1), the Board shall— (1) accept the plan; or (2) (A) reject the plan if the plan does not align with science-based targets without the use of offsets or unproven carbon emission reduction technologies; and (B) require the covered bank holding company to revise such plan in accordance with the suggestions of the Board. (e) Penalties If a covered bank holding company does not submit a plan in accordance with this section or meet the requirements set out in such a plan— (1) the Board shall— (A) apply the penalties under section 8 under regulations prescribed by the Board; (B) require divestiture of assets in order to bring the financial sector emissions of a covered bank holding company into compliance with the requirements set out in such a plan; and (C) notify the Board of Directors of the Federal Deposit Insurance Corporation of the noncompliance of the covered bank holding company; and (2) the Board of Directors of the Federal Deposit Insurance Corporation may, with respect to any covered bank holding company described in paragraph (1)(C) or a subsidiary of the bank holding company that contributes to the failure of the covered bank holding company to comply with this section— (A) terminate the insured status of the insured depository institution of which the bank holding company has control under section 8(a)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1818(a)(2)); and (B) carry out any other corrective action available under section 38 of the Federal Deposit Insurance Act (12 U.S.C. 1831o) for the insured depository institution of which the bank holding company has control under section 8(a)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1818(a)(2)). (f) Regulations Not later than 180 days after the date of enactment of this section, the Board shall issue regulations establishing the format and timing for submission of the plans required under this section..