S.1471 - Climate Change Financial Risk Act of 2025 (119th Congress)
Summary
The Climate Change Financial Risk Act of 2025 directs the Federal Reserve to develop and conduct financial risk analyses related to climate change. It mandates the creation of climate change risk scenarios and requires enhanced supervision for certain financial institutions. The bill aims to ensure the financial system is resilient to climate-related shocks and vulnerabilities.
Expected Effects
The bill will likely lead to increased regulatory scrutiny of financial institutions regarding climate-related risks. It could also result in changes to lending and investment practices to mitigate these risks. Ultimately, this could lead to a more stable financial system in the face of climate change, but also potentially higher costs for some businesses.
Potential Benefits
- Enhanced financial stability by identifying and mitigating climate-related risks.
- Improved risk management practices within financial institutions.
- Increased transparency regarding climate-related financial exposures.
- Development of analytical tools and best practices for assessing climate risks.
- Publicly available resources to help entities assess physical and transition risks.
Potential Disadvantages
- Increased regulatory burden on financial institutions, potentially leading to higher compliance costs.
- Potential for reduced lending to certain sectors, such as fossil fuels, impacting those industries.
- Risk of inaccurate or overly conservative climate risk assessments, leading to unnecessary restrictions.
- Possible negative impacts on economic growth if climate policies are too stringent.
- The creation of a new technical advisory group could add bureaucratic overhead.
Constitutional Alignment
The bill's alignment with the US Constitution is primarily based on the Commerce Clause (Article I, Section 8), which grants Congress the power to regulate interstate commerce. Climate change and its economic impacts can be argued to fall under this purview, as they affect various sectors and have national implications. The bill also aligns with the general welfare clause, as it aims to protect the financial system and the economy from climate-related risks.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).