US House Democrats have introduced a bill that would require the Federal Reserve to bring in policies restricting finance for fossil fuel and deforestation activities. The proposed law would oblige the Fed to force all large banks to align the financing of fossil fuels with science-based emissions targets.
The Fossil Free Finance Act has been proposed by a group of progressive representatives – Mondaire Jones, Rashida Tlaib, and Ayanna Pressley, and would require banks to stop funding fossil fuel projects by 2030.
The measure, which would apply to all bank holding companies with more than US$50 billion in assets, would prohibit investment in new or expanded fossil fuel projects after 2022. It would also end financing of thermal coal projects after 2024.
Aimed at aligning bank lending with US obligations under the Paris Agreement, the proposed bill seeks a 50% reduction in financed emissions by 2030 and a 100% reduction in financed emissions by 2050.
The bill amends the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Bank Holding Companies Act to codify the Fed’s authority to mandate alignment with US emissions reduction targets.
It adds financed emissions to the list of criteria for designating non-bank systemically important financial institutions (SIFIs). The bill also expands the power of the Financial Stability Oversight Council to subject non-bank financial firms to climate-related rules and requires the Fed to report to Congress on commitments and progress made by banks and nonbank SIFIs to reduce financed emissions.
So far, the bill has been co-sponsored by 14 House Democrats and is endorsed by a range of civil society organisations, including Public Citizen, 350.org, Friends of the Earth US, the Sunrise Movement, Americans for Financial Reform and Sierra Club.
“In just the last five years after the Paris Climate Agreement was signed, big banks have invested nearly $4 trillion in emissions financing,” Jones said in an online event introducing the Fossil Free Finance Act.
“This flow of money exposes our financial system, our economy, our communities and our planet to astronomically high levels of climate risk,” he added, calling the bill “a common-sense idea that’s key to combating the climate crisis”.
“The Federal Reserve’s role is not to surrender our planet to corporate polluters and shepherd our financial system to its destruction,” added Congresswoman Tlaib. “The Federal Reserve’s role is to act.”
This page was last updated September 17, 2021
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