Fed gets new power to stress-test banks on climate risk

What it does

This bill requires the Federal Reserve to develop climate-change risk scenarios and conduct biennial stress tests on large banks and financial companies to assess whether they can absorb losses from physical climate impacts (flooding, heat, storms) and transition risks (stranded fossil-fuel assets, policy shifts). It establishes a technical advisory group of climate scientists and economists, mandates climate-risk resolution plans for the largest firms, and surveys mid-sized banks on their climate exposure and adaptation plans. The goal is to identify and mitigate systemic financial risks posed by climate change before they destabilize the banking system.

Why we flagged it

The bill's core mechanism is regulatory oversight—requiring the Federal Reserve to conduct climate-risk stress tests and enhanced supervision of large financial institutions. It is not a subsidy, tax provision, or deregulation, but rather an expansion of prudential banking supervision to address an emerging systemic risk.

What the text implies

• The bill's definition of 'covered entity' (banks with $100B+ in assets) captures roughly 30–40 U.S. institutions; smaller regional banks face only a voluntary survey, creating a two-tier climate-risk regime that may leave mid-sized lenders underprepared for climate shocks.
• Climate-risk resolution plans may force large banks to divest from fossil-fuel-heavy sectors or regions, accelerating the transition away from carbon-intensive industries faster than market forces alone—a de facto climate policy tool embedded in banking regulation.
• The Technical Development Group's public recommendations and resources (section 4(c)(5)) may influence non-covered entities' climate risk assessment practices without formal regulatory authority, creating soft regulatory pressure on smaller institutions.
• Biennial stress tests tied to three fixed temperature scenarios (1.5°C, 2°C, and current-policy) may become outdated if climate science or policy trajectories shift; the bill allows updates but does not specify a formal review cadence.
• The survey of mid-sized banks (surveyed entities, $10B–$100B in assets) is exploratory and non-binding; results are aggregated and anonymized, limiting enforcement leverage and potentially delaying corrective action at systemically important but sub-covered institutions.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

Citizens benefit from stronger financial system resilience and early identification of climate-related systemic risks that could trigger banking crises. However, compliance costs may be passed to consumers through higher fees or reduced credit availability, and the bill's focus on large institutions leaves smaller regional banks and non-bank lenders with less oversight, potentially concentrating climate risk in less-regulated corners of the financial system.

Named in the bill

Federal Reserve Board of Governors, National Oceanic and Atmospheric Administration (NOAA), Environmental Protection Agency (EPA), Department of Energy, National Aeronautics and Space Administration (NASA), U.S. Geological Survey, Financial Stability Oversight Council, Commodity Futures Trading Commission, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Bank holding companies (covered entities), Nonbank financial companies (covered entities)

Where it stands

7 cosponsors: 7 Democrats.

• Apr 10, 2025 — Introduced · Congress.gov: “Introduced in Senate”
• Apr 10, 2025 — Referred to Senate Committee on Banking, Housing, and Urban Affairs · Congress.gov: “Read twice and referred to the Committee on Banking, Housing, and Urban Affairs”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

1 lobbying clients named this bill on 2 disclosure filings across 2 quarters, Dec 2025 to Jun 2026. Those filings disclosed $1,005,758 in lobbying spend. A filing names 133 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 0% of bills with at least one filing.

Brian Schatz, the sponsor, reported $431,697 in PAC receipts in the 2026 cycle.

• National Association of Mutual Insurance Companies — $1,005,758 on 2 filings

Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.