Democrats reintroduce Climate Risk Disclosure Act


Sustainability and Environmental, Social and Governance Alert

Energy Alert


Congressional Democrats recently reintroduced the Climate Risk Disclosure Act, which would require companies to document their financial exposure to climate risks. The renewed bill comes at a time when agencies under the Biden Administration, among them the Treasury Department and the SEC, are eyeing broad financial disclosure mandates targeting corporate environmental risks.

The bill, drafted with help from Biden Administration officials, would give the SEC a legislative mandate to enact climate disclosure requirements. The bill is intended to help companies and investors assess their exposure to climate-change risk and push companies to address their contributions to climate change.

The bill

Senator Elizabeth Warren (D-MA) and Representative Sean Casten (D-IL) introduced the Climate Risk Disclosure Act in mid-April with broad support from House and Senate Democrats. The bill directs the SEC to consult with climate experts from other federal agencies and to issue a set of rules over two years requiring publicly listed companies to disclose:

  1. direct and indirect greenhouse gas emissions
  2. any fossil fuel assets they own or manage
  3. climate-change risk management strategies and
  4. how their company valuations would fare if:
    • the world warmed by 1.5 degrees Celsius over preindustrial conditions or
    • lawmakers passed policies to avert that potential.

The bill directs the SEC to tailor these disclosure requirements to different industries and to impose additional disclosure requirements on companies engaged in the commercial development of fossil fuels.


The Climate Risk Disclosure Act comes as the Administration rolls out its whole-of-government approach to combating climate change. The President’s appointment of climate-conscious officials to key positions throughout the Executive Branch and an increasing focus on the role of mandatory corporate climate disclosure are two pillars of that approach. One such appointee, Treasury Secretary Janet Yellen, has flagged climate change as a threat to the financial system and signaled she will use the Treasury’s perch on the Financial Stability Oversight Council to assess emerging risks from climate change. Yellen also plans to create a “climate hub” at Treasury to focus on “financial system-related risks and tax policy incentives” related to climate change.

The SEC has also had a particular focus on climate change since President Biden’s inauguration. For instance, the agency is currently seeking public input on a climate change disclosure framework. And it has stood up a task force to police public companies that fail to disclose material business risks stemming from climate change, such as the potential depreciation of fossil fuel assets or supply chain disruption caused by flooding or wildfires. Newly confirmed SEC Chairman Gary Gensler also voiced support for climate change disclosures during his confirmation hearings and pledged that the SEC under his leadership will undertake economic analysis and seek public feedback on how to make that aim a reality. "There are tens of trillions of investor dollars that are going to be looking for more information about climate risk," he said, adding that "issuers will benefit from such disclosures" as well.

Likelihood of passage

It is against this backdrop that the Climate Risk Disclosure Act has been reintroduced. First proposed in 2019 and approved in the House Financial Services Committee before losing steam, the bill has the backing of powerful Democrats, including Speaker of the House Nancy Pelosi (D-CA) and Senate Majority Leader Chuck Schumer (D-NY). The House Financial Services Committee has agreed to take up the bill once more.

The bill would complement the federal government’s current regulatory tools. While the Treasury Department can set thorough disclosure rules under the Dodd-Frank Act, Representative Casten stated that the Climate Risk Disclosure Act would serve as a valuable reinforcement in light of the change in administration. “The underlying reasons and the need for this bill and for the accompanying SEC action is to make sure that investors understand what the climate risk is they're taking on when they buy a share of a given company, and understand that in a consistent way and then allocate capital accordingly,” Casten said.

Because Democrats hold a slim majority in both chambers, marshalling the necessary votes to pass the Climate Risk Disclosure Act will likely take considerable time and political capital. Meanwhile, both the Treasury Department and the SEC appear poised to implement climate risk disclosures on their own. Regardless of how they are implemented, companies should begin gathering information and taking steps to disclose their climate risks. For guidance on how companies can prepare for increased climate disclosures, see this recent DLA Piper Alert.


The Biden Administration has been following through on its campaign promise to place climate change at the center of his administration’s agenda. Congressional action would make delivering on that agenda easier. The Climate Risk Disclosure Act is another step toward durable federal action on climate change through increased corporate transparency regarding climate risks.

While the Climate Risk Disclosure Act may prove difficult to pass, several federal agencies, among them the Treasury Department and the SEC, are already preparing to implement climate risk disclosures under their extant authority. In either event, prudent companies are beginning to prepare now for expanded climate reporting.

To learn more about the implications of these developments for your business, please contact the authors or your DLA Piper relationship lawyer.

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