Addressing Climate Financial Risk Act of 2026
- Sponsor
- Rep. Casten, Sean [D-IL-6]
- Committees
- Financial Services Committee (primary)
- Last action
- Jan 27, 2026
Bottom line
The bill aims to integrate climate-related financial risk assessment and mitigation into the core functions of federal financial regulatory bodies and the insurance sector to enhance financial stability.
What it actually does
This bill establishes two new committees within the Financial Stability Oversight Council (FSOC) to identify, assess, and mitigate climate-related risks to the financial system. It mandates annual reports on climate financial risk, requires federal banking agencies and the National Credit Union Administration (NCUA) to update supervisory guidance for large institutions, and directs the Federal Insurance Office (FIO) to report on insurance sector impacts and collect granular homeowners insurance data.
Proponents argue
Supporters argue that climate change poses significant and growing risks to the stability of the U.S. financial system, encompassing credit, liquidity, market, operational, and reputational risks. They contend that proactive identification, assessment, and mitigation through dedicated committees, improved data, enhanced disclosures, and updated supervisory guidance are essential to protect the economy from potential shocks and ensure long-term financial resilience, emphasizing the need for coordinated federal action and international collaboration.
Opponents contend
Opponents might argue that this bill overreaches by injecting climate policy into financial regulation, potentially diverting regulatory agencies from their core mandates of ensuring financial stability and consumer protection. They may contend that existing regulatory frameworks are sufficient to address emerging risks, regardless of their origin, and that creating new committees and mandates could lead to unnecessary bureaucracy, increased compliance costs for financial institutions, and potentially politicize financial supervision. Some may also question the expertise of financial regulators in climate science or argue that such measures could hinder economic growth by imposing undue burdens on industries.
The bill is concise and clearly structured, making it accessible for an informed reader to understand its core provisions within a reasonable timeframe.
Section 2, new Sec. 121A of the Financial Stability Act of 2010
Establishment of Climate Financial Risk Committee (CFRC)
This provision establishes the Climate Financial Risk Committee within the Financial Stability Oversight Council (FSOC). Its purpose is to support the FSOC in identifying priority areas for assessing and mitigating climate-related risks, coordinate information sharing and common approaches among Council member agencies, and collaborate with the Office of Financial Research to compile data and provide analytical tools. The committee will also provide updates to the Council on efforts to address climate financial risk, including incorporating it into regulatory programs, improving data, enhancing disclosures, and assessing financial stability risks.
Supporters argue
Supporters argue that a dedicated committee is essential for a coordinated and consistent federal approach to identifying and mitigating climate-related systemic financial risks, ensuring that all relevant agencies are working together effectively.
Critics contend
Critics may contend that this committee adds an unnecessary layer of bureaucracy, potentially duplicating existing risk management functions within agencies or diverting resources from other critical financial stability concerns.
Tradeoffs
The provision balances the need for enhanced interagency coordination on a complex, cross-cutting risk with the potential for increased bureaucratic overhead and resource allocation challenges.
Section 2, new Sec. 121B of the Financial Stability Act of 2010
Establishment of Advisory Committee on Climate Risk (ACCR)
This provision establishes an Advisory Committee on Climate Risk within the FSOC, consisting of up to 30 members. Membership includes climate science experts, climate economics/financial risk experts (from insurance, capital markets, banking, international finance, housing finance, asset owners), non-governmental research institutions, consumer advocacy/labor union groups, investor networks/shareholder advocacy groups, and relevant financial services/commercial businesses (excluding oil or gas industry stakeholders). This committee will consult with and assist the Council in gathering information, conducting analysis, and making recommendations on climate-related financial risks, meeting bimonthly.
Section 2, new Sec. 121C of the Financial Stability Act of 2010
Mandated Annual Report on Climate Financial Risk
This provision requires the FSOC to publish an annual report, in coordination with the newly established Climate Financial Risk Committee and Advisory Committee. The report must assess the potential impact of climate-related risks on U.S. financial stability, evaluate the expertise and data quality available to regulators, analyze property and casualty insurance trends, review risk management by nonbank SIFIs and large bank holding companies, and compare U.S. climate disclosure requirements with international regimes. The report must also provide recommendations to federal and state financial regulatory agencies and Congress on improving the financial regulatory system's ability to identify and mitigate climate financial risks.
Section 3
Update Supervisory Guidance on Climate Financial Risk
This provision mandates that each Federal banking agency and the National Credit Union Administration (NCUA) update their applicable supervisory guidance to explicitly include climate financial risk. This includes credit, liquidity, market, operational, and reputational risks. The updates are intended to ensure that institutions supervised by these agencies with greater than $50 billion in assets appropriately identify and mitigate climate financial risk. The Financial Institutions Examination Council (FIEOC) is tasked with ensuring that this updated guidance is coordinated among the federal agencies and shared with state regulators.
Section 4
Update Nonbank SIFI Designation Guidance
This provision requires the Financial Stability Oversight Council (FSOC) to update its existing guidance for designating nonbank financial companies as Systemically Important Financial Institutions (SIFIs). The update must specifically detail how the Council will incorporate climate financial risk into its determinations regarding whether a nonbank company's material financial distress could pose a threat to U.S. financial stability.
Section 5
Federal Insurance Office (FIO) Report on Insurance Regulation and Climate Financial Risk
This provision directs the Federal Insurance Office (FIO) to publish a report within one year of the bill's enactment. The report must assess the potential impact of climate financial risk on the U.S. insurance sector, provide an update on the implementation of recommendations from FIO's 2023 report titled 'Insurance Supervision and Regulation of Climate-Related Risks,' and recommend ways to modernize and improve the regulation and supervision of climate financial risk within the U.S. insurance sector.
Section 6
Federal Insurance Office (FIO) Data Collection on Climate-Related Risks
This provision mandates the Federal Insurance Office (FIO) to publish annual reports on homeowners insurance underwriting data, starting within one year of enactment for calendar years 2023 and 2024, and annually thereafter. This data, collected directly from insurance companies and disaggregated by zip code, must include granular information on premiums, policies, claims, losses, limits, deductibles, non-renewals, and cancellations. The purpose is to assess climate-related risks across state insurance markets and their potential impact on U.S. financial stability. The FIO must consult with the National Association of Insurance Commissioners (NAIC) and State insurance commissioners, and ensure the reports do not include personally identifiable information.
Section 7
Sense of Congress on Improving Global Coordination
This provision expresses the Sense of Congress that relevant Federal financial regulatory agencies and the Department of the Treasury, including the Federal Insurance Office (FIO), should actively participate in international organizations focused on climate financial risk. Specifically, it encourages joining the Network for Greening the Financial System (NGFS) and the Task Force on Climate-Related Financial Risks of the Basel Committee on Banking Supervision, and generally working with international regulators on climate financial risk whenever possible, consistent with U.S. law.
The Climate Financial Risk Committee may not be terminated or modified except pursuant to an Act of Congress.
Section 2, new Sec. 121A(c)
Why it matters:This provision makes the committee more permanent and difficult to dismantle or alter by executive action alone, suggesting a deliberate intent to ensure its longevity and stability. It is standard legislative practice to specify how entities can be modified or terminated.
Case for: Proponents would argue this ensures the committee's long-term stability and independence, preventing future administrations from easily disbanding or weakening its mandate, thereby providing a consistent focus on climate financial risk.
Case against: Opponents might argue that this limits executive flexibility to adapt government structures to changing priorities or to streamline operations, potentially entrenching a committee that may become redundant or inefficient over time.
Estimated impact: This clause significantly increases the institutional permanence of the Climate Financial Risk Committee within the FSOC structure.
The Advisory Committee on Climate Risk shall include 'Relevant stakeholders from the financial services industry, commercial businesses, or other organizations, which shall not include any stakeholders from the oil or gas industry.'
Section 2, new Sec. 121B(b)(6)
Why it matters:This is a politically significant exclusion, likely intended to shape the committee's perspective and avoid perceived conflicts of interest, but it could also be seen as limiting the scope of expertise. Its placement within a list of inclusions makes it less prominent than a standalone prohibition.
Case for: Proponents would argue that excluding the oil and gas industry ensures the committee's focus remains on financial stability from a broad, public interest perspective, free from potential industry-specific lobbying or conflicts of interest that might hinder robust climate risk assessment.
Case against: Opponents might contend that excluding a major sector directly impacted by climate transition risks limits the committee's ability to gain a comprehensive understanding of the economic realities and challenges, potentially leading to less practical or effective recommendations.
Estimated impact: This exclusion shapes the composition and potential recommendations of a key advisory body on climate financial risk, influencing the perspectives brought to the FSOC.
The Federal Insurance Office's mandated homeowners insurance underwriting data collection 'shall be disaggregated by zip code' and 'shall include granular data on premiums, policies, claims, losses, limits, deductibles, non-renewals, and cancellations, consistent with the information requested under the “Federal Insurance Office Climate-Related Financial Risk Data Collection for U.S. Homeowners Multi-Peril Underwriting Data” (88 Fed. Reg. 75380) as modified by the most recent National Association of Insurance Commissioners Property & Casualty Insurance Market Intelligence Data Call'.
Section 6(b)(1) and (2)
Why it matters:The level of detail is technical and specific, reflecting a precise legislative intent for the scope and granularity of data collection. This is standard for specifying data requirements in legislation.
Case for: Proponents argue that this granular, zip-code level data is essential for accurate, localized assessment of climate-related risks to the insurance market, allowing for targeted analysis and policy responses that would be impossible with aggregated data.
Case against: Opponents (particularly from the insurance industry) might raise concerns about the significant administrative burden and cost associated with collecting and reporting such highly granular data, as well as potential issues with data privacy or misinterpretation if not handled carefully.
Estimated impact: This provision mandates a substantial and detailed data collection effort by the FIO from insurance companies, providing unprecedented granular insights into homeowners insurance markets and climate risk.