March 30, 2023
Bill Requires Fed to Mandate Big Banks Align Their Financing of Greenhouse Gas Emissions with Science-Based Emissions Targets
Bill Text (PDF) | Bill Summary (PDF) | Press Conference (Facebook)
WASHINGTON – Today, Congresswoman Ayanna Pressley (MA-07), along with Congresswoman Rashida Tlaib (MI-12) and Senator Ed Markey (D-MA), unveiled the Fossil Free Finance Act, legislation that would direct the Federal Reserve to require major banks and other Systemically Important Financial Institutions (SIFIs) to stop financing projects and activities linked to increased greenhouse gas emissions and submit a plan on how they will meet these requirements.
Specifically, the Fossil Free Finance Act would require that all banks holding more than $50 billion in assets and all nonbank SIFIs reduce financed emissions by 50 percent by 2030 and cease financing emissions by 2050. The legislation would require banks to align financing with science-based emission targets, prioritize withdrawing funding from companies and projects that have a disproportionate negative impact on low-income and minority communities, and prioritize lending to companies that provide benefits to workers impacted by the transition to a clean energy economy. In addition, the Fossil Free Finance Act would require the Federal Reserve to report to Congress on commitments made by banks and nonbank SIFIs to reduce financed emissions and make progress on their targets.
“When our federal government allows our nation’s largest banks to bankroll the dirtiest fossil fuel projects, our planet, our people, and our economy suffer,” said Rep. Pressley. “We need a financial system that recognizes the existential threat posed by climate change and takes aggressive action to stop it. Our Fossil Free Finance Act would do just that by requiring banks to stop financing dirty fossil fuel projects and help us prevent a massive, climate-induced economic collapse. We must leverage every tool at our disposal to save our economy, save our planet, and save lives before it’s too late.”
“Climate risk is financial risk—posing a grave threat to our global economy, including our financial systems. The Federal Reserve has a responsibility to protect financial stability, but instability will run rampant if climate chaos grows unabated,” said Senator Markey. “I am proud to reintroduce the Fossil Free Finance Act, legislation to require our financial institutions, including banks, to protect Americans’ savings, investments, and economy by taking into account not only the planetary but the economic threats posed by climate change.”
“My residents deserve to breathe clean air,” said Representative Tlaib. “Our neighborhoods are surrounded by polluters poisoning our air, leaving one elementary school with the worst air monitoring results than any other in the state. Financial institutions under the Federal Reserve’s supervision provided trillions in direct fossil fuel financing—and each new project makes our health disparities worse. The Federal Reserve’s role is not to surrender our planet to corporate polluters and shepherd our financial system to its destruction. The Federal Reserve’s role is to act. I am proud to join Senator Markey and Representative Pressley in introducing the Fossil Free Finance Act to require the Federal Reserve to finally address the risks climate change poses—and act at the scale this crisis demands.”
A copy of the Fossil Free Finance Act can be found HERE. A summary of the bill is available HERE.
The Fossil Free Finance Act would require financial institutions to submit and implement a plan to:
Cosponsors include Representatives Jamaal Bowman (NY-16), Pramila Jayapal (WA-07), Jamie Raskin (MD-08), and Senators Jeff Merkley (D-Ore.).
The Fossil Free Finance Act is endorsed by Public Citizen, Evergreen Action, Americans for Financial Reform, Zero Hour, 350.org and Positive Money US, Greenpeace USA, Hip Hop Caucus, 350 Conejo/San Fernando Valley, 350.org, 350Hawaii, 350Hawaii, 350NJ-Rockland, Bold Alliance, California Reinvestment Coalition, Climate Families NYC, Climate Hawks Vote, Climate Organizing Hub, Coast Range Association, Coastside Jewish Community, Dayenu: A Jewish Call to Climate Action, Divest NJ, Elders Climate Action, Extinction Rebellion San Francisco Bay Area, Fossil Free California, Fridays For Future Digital, Giniw Collective, International Student Environmental Coalition, Lakota People’s Law Project, MARBE SA, Mazaska Talks, Mid-Ohio Valley Climate Action, MN350 , New Mexico Climate Justice, New York Communities for Change, Oil and Gas Action Network, One Earth Sangha, Rise and Resist Environmental Group, Rivers & Mountains GreenFaith, Rivers & Mountains GreenFaith Circl, Seeding Sovereignty, Texas Campaign for the Environment, The Romero Institute, The YEARS Project, Third Act, Third Act Virginia, Youth Emergency Auxiliary Service Sierra Leone, and Zero Hour.
“The Fossil Free Finance Act is the remedy for the Federal Reserve’s slow and timid approach to protecting the financial system. Even after the Fed has recognized climate change and the energy transition pose a systemic risk to the financial system, it is still moving far too slowly. As the failure at Silicon Valley Bank and its peers show, the financial system cannot afford for the Fed to wait until things break. This bill will require the Fed to proactively manage the risks banks face, winding down their exposure to volatile high emissions assets in line with global, science-based targets. By putting the financial system on this safer path, the Fossil Free Finance Act will also help build resilience for the unforeseeable climate risks to come,” said Robert Weissman, President at Public Citizen.
“Wall Street banks have failed to live up to their own climate commitments by providing billions of dollars to new fossil fuel projects. Without strong federal oversight and regulation, these banks will only continue pouring money into the fossil fuel expansion driving the climate crisis, taking on excessive risk and threatening to destabilize the entire economy. So far, financial regulators have failed to rein in Wall Street’s reckless behavior. We applaud Senator Markey and Representative Pressley for their leadership in protecting our financial system from a climate-driven financial crash,” said Ben Jealous, Executive Director of the Sierra Club.
“Big Banks have long been propping up polluters over people. Bailouts to banks and the fossil fuel industry persist while everyday people in frontline communities are left holding the bag. The Fossil Free Finance Act is an important step toward eradicating the disproportionate impacts of climate change on Black, Brown and Indigenous communities. Cutting off the flow of money toward destructive, extractive industries would help stop projects like Willow and Keystone XL before they ever get off the ground, lifting organized people over organized money,” said Tanya Clay House, Executive Vice President of the Hip Hop Caucus.
“Despite numerous warnings about the risks climate change poses to consumer finances and the economy, too many Wall Street banks have only been adding fuel to the fire. The longer banks continue to finance dirty fossil fuel projects, the more lives, homes and communities will be lost to or damaged by extreme weather. The Fossil Free Finance Act is just what we need to make large banks finally take climate-related financial risks seriously. This act would help us get and stay on the course that science indicates is necessary to stave off climate disaster for current and future generations,” said Mike Litt, Consumer Campaign Director at U.S. PIRG.
“Wall Street banks have time again shied away from their climate commitments, proving they have no intention to stop financing harmful and risky fossil fuel projects. These banks are hurtling our economy towards a climate-fuelled crash and unless regulators step up to rein in their reckless behavior, the most vulnerable communities will be left to foot the bill. The Federal Reserve has been dragging its feet on climate for too long. The longer we wait, the greater the risk. The Fossil Free Finance Act might be exactly what we need to get the Fed up to speed, to protect our economy and our communities from Wall Street’s exploits,” said Akiksha Chatterji, Lead Campaigner at Positive Money US.
Congresswoman Pressley, a member of the House Financial Services Committee, has been a vocal champion for consumers and ensuring that the U.S. banking system mitigates climate risk and works for everyday workers and families. She first introduced the Fossil Free Finance Act in September 2021 with Reps. Rashida Tlaib and Mondaire Jones.
In August 2021, Rep. Pressley and Reps. Alexandria Ocasio-Cortez (NY-14), Congresswoman Rashida Tlaib (MI-13), Congressman Jesús “Chuy” García (IL-04), and Congressman Mondaire Jones (NY-17) urged President Biden to replace Federal Reserve Chair Jerome Powell with one focused on eliminating climate risk and advancing racial and economic justice.
In June 2021, she introduced the Greater Supervision in Banking Act, sweeping legislation that strengthens Congressional oversight of the country’s largest banks in order to protect consumers and prevent deceptive behavior from financial institutions. Specifically, the bill requires the banks to submit an annual public report including, among other things, information about their size and complexity, market activity, employee wages, diversity, climate risk and environmental harms, misconduct, use of forced arbitration, cybersecurity measures, and any enforcement or regulatory actions taken against them over the past year.
In April 2019, she questioned G-SIB CEOs about discriminatory lending practices during their first appearance before Congress in over a decade. She has also introduced the Payment Modernization Act – legislation requiring a more reasonable timeline for the Federal Reserve’s faster payments system and prioritizing consumer protection and wellbeing in the development process.
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