H.R. 7246: Addressing Climate Financial Risk Act of 2026

The bill, identified as the Addressing Climate Financial Risk Act of 2026, aims to create two new committees within the Financial Stability Oversight Council (FSOC) that will focus on assessing and mitigating climate-related financial risks. Below are the key elements and functions of the proposed committees and their intended impacts:

Climate Financial Risk Committee

• Establishment of the Climate Financial Risk Committee: This committee will support the FSOC in identifying and managing climate-related risks to the financial system.
• Roles include:
  • Identifying priority areas for assessing climate risks.
  • Sharing information and standards among the member agencies.
  • Collaborating with the Office of Financial Research to gather and analyze climate and financial data.
  • Providing updates on efforts to incorporate climate financial risk into regulatory practices.
• The committee will have members from the FSOC’s member agencies and is led by the Deputy Assistant Secretary of the Council.
• It cannot be disbanded without Congressional approval.

Advisory Committee on Climate Risk

• Creation of the Advisory Committee on Climate Risk: This committee will assist the FSOC by gathering information and recommending actions to address climate-related financial risks.
• Membership will include:
  • Climate science experts from various agencies.
  • Experts in climate economics and financial risk.
  • Representatives from consumer advocacy groups and shareholder advocacy networks.
• This committee will meet bi-monthly to ensure ongoing consultation and collaboration with the FSOC.

Reporting and Evaluation

• The FSOC will generate an annual report on climate financial risk, assessing various aspects such as:
  • The impact of climate-related risks on financial stability.
  • The expertise of regulatory agencies regarding climate risks.
  • The quality and availability of data related to these risks.
  • Insurance market trends and their effects on financial systems.
  • Regulatory coordination on climate financial risk.
• Recommendations will be provided to enhance the financial regulatory system's ability to manage climate-related risks.

Supervisory Guidance Update

• Each Federal banking agency will update its supervisory guidance to address climate financial risks adequately for institutions with assets over $50 billion.
• The Financial Institutions Examination Council will coordinate this guidance across agencies.

Federal Insurance Office's Role

• The bill mandates that the Federal Insurance Office (FIO) evaluate the potential impacts of climate financial risks specifically on the insurance sector within one year of enactment.
• The FIO is required to collect data on homeowners insurance underwriting to assess climate-related risks and make this data publicly available.

International Coordination

• The legislation encourages U.S. financial regulatory agencies to engage with international organizations focused on climate financial risk and improve global cooperation.

Conclusion of Findings

The bill seeks to enhance the nation’s preparedness for climate-related financial risks through structured committees, regular reporting, and improved regulatory guidance.

Relevant Companies

• AXP: American Express, a large financial services company that would need to adapt its risk assessment and financial planning strategies to align with new climate risk disclosures.
• GS: Goldman Sachs, an investment bank that would likely need to implement new models for assessing climate-related investment risks and potential impacts on portfolios.