1. Short title
This Act may be cited as the “Climate Protection and Sustainable Communities Act”.
Climate Protection and Sustainable Communities Act
A BILL
To require Federal financial supervisory agencies to evaluate a financial institution’s record of meeting community environmentally sustainable investment needs as part of examinations, and for other purposes.
2. Congressional findings and statement of purpose
Findings— Congress finds the following:
Financial institutions that are federally regulated and supervised have an obligation to serve the convenience and needs of the entire community, consistent with safe and sound operations. These institutions include, but are not limited to, insured depository institutions (and their holding companies, if any), investment advisers, broker dealers, insurers, non-bank lenders, credit unions, investment companies, and other financial institutions of significant size and operations.
The convenience and needs of communities include the need for environmentally sustainable investment because—
these financial institutions have, as a result of their investment, lending, and other activities, contributed to climate change and its effects, and therefore have a responsibility to act to mitigate climate change; and
these financial institutions receive Federal benefits not available to other types of businesses, including—
support for United States Treasury bond markets, including extraordinary commitments to purchase such bonds since the onset of the COVID-19 health crisis;
access to the Federal Reserve Discount Window and other special lending facilities established by the Board of Governors of the Federal Reserve System and supported by the Treasury department;
measures to maintain efficient, transparent, and competitive markets;
regulatory relief during times of stress in the financial system, such as the ongoing COVID-19 health crisis; and
other actions to ensure financial stability and mitigate risk to the financial system as a whole.
Regulated financial institutions have continuing and affirmative obligation to help meet the environmentally sustainable investment needs of the local communities in which they are chartered.
Regulated financial institutions should reflect the communities which they serve, which includes people of color and women.
Purpose— It is the purpose of this Act to require covered financial institutions that are regulated and supervised by one or more appropriate financial regulators to meet the environmentally sustainable investment needs of the entire community, consistent with the safe and sound operation of such institutions.
3. Definitions
In general— In this Act:
Application for a deposit facility— The term application for a deposit facility means an application to the appropriate financial regulator otherwise required under Federal law or regulations thereunder for—
a charter for a national bank or Federal savings and loan association;
deposit insurance in connection with a newly chartered State bank, savings bank, savings and loan association or similar institution;
the establishment of a domestic branch or other facility with the ability to accept deposits of a regulated financial institution;
the relocation of the home office or a branch office of an insured depository institution (as defined in section 3 of the Federal Deposit Insurance Act);
the merger or consolidation with, or the acquisition of the assets, or the assumption of the liabilities of an insured depository institution requiring approval under section 18(c) of the Federal Deposit Insurance Act or under regulations issued under the authority of title IV of the National Housing Act; or
the acquisition of shares in, or the assets of, an insured depository institution requiring approval under section 3 of the Bank Holding Company Act of 1956 or section 408(e) of the National Housing Act.
Appropriate financial regulator— The term appropriate financial regulator has the meaning given in section 803 of the Payment, Clearing, and Settlement Supervision Act of 2010 (12 U.S.C. 5462).
Covered financial institution— The term covered financial institution means—
an insured depository institution (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813));
a depository institution holding company (as defined in such section);
an investment adviser or investment company (as defined in section 202 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–2));
a covered broker or dealer (as defined in section 201(a)(7) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5381(a)(7)));
admitted insurers;
an insured credit union (as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752));
a non-bank lender; and
any entity that has been identified as systemically important by the Financial Stability Oversight Council.
Environmentally sustainable investment— The term environmentally sustainable investment means investments, loans, and other financial products or services that support climate mitigation and adaptation efforts, enterprises, and projects whose impacts have been evaluated to equitably and sustainably advance social and environmental welfare.
Application of entire community— For purposes of this Act, with respect to a covered financial institution whose business predominately consists of serving the needs of military personnel who are not located within a defined geographic area, such covered financial institution may define the term entire community to include the entire deposit customer base without regard to geographic proximity to the covered financial institution.
4. Assessment of covered financial institutions
In general— Except as provided in section 6, not less than once every 24 months an appropriate financial regulator shall assess the record of a covered financial institution of meeting the environmentally sustainable investment needs of the entire community of such institution, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of such institution.
Requirements for covered financial institutions—
Rating—
In general— A covered financial institution that received a rating described in subparagraph (C), (D), or (E) of section 5(b)(2) shall, within the 12-month period beginning on the date of receipt of such rating, take such action as may be necessary in order for such institution to achieve a rating of “satisfactory record of meeting community environmentally sustainable investment needs”.
Penalty— A covered financial institution that fails to meet the requirements of subparagraph (A) shall be subject to such penalties as determined appropriate by the appropriate financial regulator of such institution.
Approval of requests— With respect to any request submitted by a covered financial institution to the appropriate financial regulator to take an action that requires the approval of the regulator, the appropriate financial regulator may only approve such request if the covered financial institution received a rating of “satisfactory record of meeting community environmentally sustainable investment needs” or better during the most recent examination of the covered financial institution under this section.
Majority-Owned institutions— In assessing and taking into account, under subsection (a), the record of a nonminority-owned and nonwomen-owned covered financial institution, the appropriate financial regulator may consider as a factor capital investment, loan participation, and other ventures undertaken by such covered financial institution in cooperation with minority- and women-owned financial institutions and low-income credit unions, if such activities help meet the environmentally sustainable investment needs of the local communities in which such covered financial institution is chartered.
Financial Holding Company Requirement—
In general— An election by a bank holding company to become a financial holding company under section 4 of the Bank Holding Company Act of 1956 shall not be effective if—
the Board finds that, as of the date the declaration of such election and the certification is filed by such holding company under section 4(l)(1)(C) of the Bank Holding Company Act of 1956, not all of the subsidiary insured depository institutions of the bank holding company had achieved a rating of “satisfactory record of meeting community environmentally sustainable investment needs”, or better, at the most recent examination of each such institution; and
the Board notifies the company of such finding before the end of the 30-day period beginning on such date.
Limited exclusions for newly acquired insured depository institutions— Any insured depository institution acquired by a bank holding company during the 12-month period preceding the date of the submission to the Board of the declaration and certification under section 4(l)(1)(C) of the Bank Holding Company Act of 1956 may be excluded for purposes of paragraph (1) during the 12-month period beginning on the date of such acquisition if—
the bank holding company has submitted an affirmative plan to the appropriate financial regulator to take such action as may be necessary in order for such institution to achieve a rating of “satisfactory record of meeting community environmentally sustainable investment needs”, or better, at the next examination of the institution; and
the plan has been accepted by such agency.
Definitions— For purposes of this subsection, the following definitions shall apply:
Bank holding company; financial holding company— The terms bank holding company and financial holding company have the meanings given those terms in section 2 of the Bank Holding Company Act of 1956.
Board— The term Board means the Board of Governors of the Federal Reserve System.
Insured depository institution— The term insured depository institution has the meaning given the term in section 3(c) of the Federal Deposit Insurance Act.
5. Written evaluations
Required—
In general— Upon the conclusion of each examination of a covered financial institution under section 4, the appropriate financial regulator shall prepare a written evaluation of the institution's record of meeting the environmentally sustainable investment needs of its entire community, including low- and moderate-income neighborhoods.
Public and confidential sections— Each written evaluation required under paragraph (1) shall have a public section and a confidential section.
Public Section of Report—
Findings and conclusions—
Contents of written evaluation— The public section of the written evaluation shall—
state the appropriate financial regulator’s conclusions for each assessment factor identified in the regulations prescribed by such appropriate financial regulator to implement this Act;
discuss the facts and data supporting such conclusions; and
contain the rating of the covered financial institution and a statement describing the basis for the rating.
Metropolitan area distinctions— The information required by clauses (i) and (ii) of subparagraph (A) shall be presented separately for each metropolitan area in which a covered financial institution maintains one or more domestic branch offices.
Assigned rating— The rating of a covered financial institution referred to in paragraph (1)(A)(iii) shall be one of the following:
“Outstanding record of meeting community environmentally sustainable investment needs”.
“Satisfactory record of meeting community environmentally sustainable investment needs”.
“Sufficient record of meeting community environmentally sustainable investment needs”.
“Needs to improve record of meeting community environmentally sustainable investment needs”.
“Substantial noncompliance in meeting community environmentally sustainable investment needs”.
Confidential Section of Report—
Privacy of named individuals— The confidential section of the written evaluation shall contain—
all references that identify any customer of the covered financial institution, any employee or officer of such institution, or any person or organization that has provided information in confidence to a Federal or State financial supervisory agency; and
any statements obtained or made by the appropriate financial regulator in the course of an examination which, in the judgment of the regulator, are too sensitive or speculative in nature to disclose to the covered financial institution or the public.
Disclosure to depository institution— The confidential section may be disclosed, in whole or part, to the covered financial institution, if the appropriate financial regulator determines that such disclosure will promote the objectives of this Act. However, disclosure under this paragraph shall not identify a person or organization that has provided information in confidence to a Federal or State financial supervisory agency.
Institutions With Interstate Branches—
State-by-state evaluation— In the case of a covered financial institution that maintains domestic branches in 2 or more States, the appropriate financial regulator shall prepare—
a written evaluation of the entire institution's record of performance under this title, as required by subsections (a), (b), and (c); and
for each State in which the institution maintains 1 or more domestic branches, a separate written evaluation of the institution's record of performance within such State under this title, as required by subsections (a), (b), and (c).
Multistate metropolitan areas— In the case of a covered financial institution that maintains domestic branches in 2 or more States within a multistate metropolitan area, the appropriate financial regulator shall prepare a separate written evaluation of the institution's record of performance within such metropolitan area under this title, as required by subsections (a), (b), and (c). If the appropriate financial regulator prepares a written evaluation pursuant to this paragraph, the scope of the written evaluation required under paragraph (1)(B) shall be adjusted accordingly.
Content of State-level evaluation— A written evaluation prepared pursuant to paragraph (1)(B) shall—
present the information required by subparagraphs (A) and (B) of subsection (b)(1) separately for each metropolitan area in which the covered financial institution maintains 1 or more domestic branch offices and separately for the remainder of the nonmetropolitan area of the State if the covered financial institution maintains 1 or more domestic branch offices in such nonmetropolitan area; and
describe how the appropriate financial regulator has performed the examination of the covered financial institution, including a list of the individual branches examined.
Definitions— For purposes of this section the following definitions shall apply:
Domestic branch— The term domestic branch means any branch office or other facility of a covered financial institution that accepts deposits, located in any State.
Metropolitan area— The term metropolitan area means any primary metropolitan statistical area, metropolitan statistical area, or consolidated metropolitan statistical area, as defined by the Director of the Office of Management and Budget, with a population of 250,000 or more, and any other area designated as such by the appropriate financial regulator.
State— The term State has the same meaning as in section 3 of the Federal Deposit Insurance Act.
6. Small covered financial institution regulatory relief
In General— Except as provided in subsections (b) and (c), any covered financial institution with aggregate assets of not more than $250,000,000 shall be subject to routine examination under this Act—
not more than once every 60 months for an institution that has achieved a rating of “outstanding record of meeting community environmentally sustainable investment needs” at its most recent examination under section 4;
not more than once every 48 months for an institution that has received a rating of “satisfactory record of meeting community environmentally sustainable investment needs” at its most recent examination under section 4; and
at least once every 24 months for an institution that has received a rating of less than “satisfactory record of meeting community environmentally sustainable investment needs” at its most recent examination under section 4.
No Exception From Examinations in Connection With Applications for Deposit Facilities— A covered financial institution described in subsection (a) shall remain subject to examination under this title in connection with an application for a deposit facility.
Discretion— A covered financial institution described in subsection (a) may be subject to more frequent or less frequent examinations for reasonable cause under such circumstances as may be determined by the appropriate financial regulator.
7. Applicability
The requirements of this Act shall not supplant the requirements of the Community Reinvestment Act of 1977 (12 U.S.C. 2901 et seq.).
8. Report to Congress
Each appropriate financial regulator shall include in its annual report to the Congress a section outlining the actions it has taken to carry out its responsibilities under this Act.
9. Regulations
Not later than 180 days after the date of enactment of this Act, each appropriate financial regulator shall consult with each other appropriate financial regulator to issue rules to carry out this Act. To the extent practicable, the appropriate financial regulator shall issue substantially similar rules.
10. Effective date
Except as otherwise provided, the requirements of this Act shall take effect one year after the date of the enactment of this Act.