Like it or Not, CUs must Engage in the Climate Change Debate

January 28, 2021 at 9:49 am Leave a comment

Good morning, folks.

First, I want to assure you that the purpose of today’s blog is not to debate the science of climate change, or to suggest where I think it should be on the list of concerns considered by your executive team as it tries to position your credit union operations for the months and years ahead. The purpose of this blog is instead to inform you that, with yesterday’s announcement of executive orders calling for a government-wide approach to climate change, the industry at large as well as your individual credit union has become part of a discussion. It’s not if your credit union is going to take steps to mitigate the impact of climate change – but what those steps are going to be when regulators come knocking.

In reviewing yesterday’s executive order, the President didn’t specifically mention banking initiatives, but by including the Treasury Department and the HUD Secretary on the task force and emphasizing the relationship between economic justice and climate change initiatives, there’s little doubt that financial institutions will be asked to play a role in mitigating the effects of climate change. Plus, even though NCUA is an independent agency, there’s nothing to stop it from voluntarily working with the Biden administration on these issues and efforts. 

New York State’s Department of Financial Services has been at the forefront of this debate. In October, it issued this guidance making the argument for financial institutions to take an active role in integrating climate change considerations into their operations. It pointed out, for example, that extreme storms could have a disproportionately negative impact on regional and community banks which provided mortgages in impacted areas. On a more nebulous note, it argued that the transition away from a carbon-based economy will over time impact the underlying value of assets. DFS also issued specific expectations for the institutions it regulates. These include that they “start integrating the financial risks from climate change into their governance frameworks, risk management processes, and business strategies,” as well as to “start developing their approach to climate-related financial risk disclosure.” New York’s Superintendent Lacewell has recently highlighted the importance of this initiative. 

I know how much work all of you already have on your plate, and I also know that this has become one of those issues that can end a dinner party quicker than one hurricane can put a significant portion of Long Island underwater. But the sooner we lay out how we’re going to do our part, the better positioned we will be to prevent overly cumbersome, one-size-fits-all mandates.

Entry filed under: Economy, Federal Legislation, Mortgage Lending, New York State, Regulatory. Tags: , , , , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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