Time For the Climate Change Talk

May 24, 2021 at 10:07 am Leave a comment

There are three ways in which the industry can react to climate change: (1) It can pretend that the issue does not really exist; (2) It can so embrace the issue that it refuses to acknowledge the tradeoffs involved in integrating climate change considerations into its core operations, such as underwriting, or (3) it can go through the hard work of developing a consensus on an issue that will be with us for decades to come. With the caveat that this is one of those blogs when I remind you that this is my opinion and only my opinion, it’s time to decide what approach to take. 

On Thursday, President Biden issued this executive order on Climate Related Financial Risk. As part of the order, the Financial Services Oversight Council, comprised of federal banking agencies, including the NCUA, will prepare a report detailing the approaches that the agencies are taking to address Climate Related Financial Risk in their respective areas. The report will include recommendations on how identified climate-related financial risk can be mitigated, including through new or revised regulatory standards as appropriate. Federal housing regulators have already been tasked with examining climate change risks and the housing market. 

In other words, we are moving past the platitudes. Within the next year we can expect to see regulators, including the NCUA, propose specific regulatory mandates. It’s one thing to discuss the impact of climate change, it’s quite another to see the direct impact that policies designed to mitigate its effects will have on your bottom line. 

As always, the purpose of this blog is not to give you my opinion on climate change but to get you thinking and preparing about future regulatory developments. The problem is that the feelings one has on the appropriate regulatory framework are inexplicably intertwined with one’s political perspective. For instance, there are individuals who believe that climate change is an unproven piece of scientific speculation which is causing policy makers to put the present-day jobs of Americans at risk. 

On the other end of the spectrum, are those who believe that climate change is a current existential threat to humanity’s existence and that it can be addressed in some way that not only makes the world safer, but reconfigures the economy in a way that creates present-day jobs for Americans. Personally, I believe that there is a huge middle ground out there which both recognizes the threats but also recognizes the reality that addressing climate change will involve tradeoffs.

Where does this leave the credit union industry when it comes to formulating responses to propose regulations in the coming months? Yours truly would love to see the industry develop and publish a set of guiding principles which it will use when analyzing regulatory and legislative proposals in this area. Industries are increasingly being pressured to take public stances on a wide range of hot-button topics. A thoughtful debate over the next six months could serve every credit union by demonstrating how credit unions don’t shy away from the tough issues that impact their membership and giving them a response when they are asked what approach they are taking to climate change.  

Entry filed under: 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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