In a first of its kind, NY cites risk from climate change

Credit unions and banks in New York have been advised by their state regulator to integrate financial risks from climate change into their governance, risk-management and business strategy frameworks, reportedly the first time a state supervisory agency for financial institutions has taken that approach.

In a release this week, the New York State Department of Financial Services said the guidance follows similar direction given to state-regulated insurers. This week’s action, the agency indicated, would ensure that all of its regulated entities are managing climate risks.

State Superintendent of Financial Services Linda A. Lacewell, in the release, asserted that climate change is happening now, and steps must be taken to manage financial risks. “For example, regulated organizations should designate a board member, a committee of the board (or an equivalent function), as well as a senior management function, as accountable for the organization’s assessment and management of the financial risks from climate change,” the agency said in its release. “This should include an enterprise-wide risk assessment to evaluate climate change and its impacts on risk factors, such as credit risk, market risk, liquidity risk, operational risk, reputational risk, and strategy risk.”

The letter was advisory only; it outlined no supervisory actions to be taken by the agency.

LINK:
Letter from NY DFS: climate change and financial risks