President Biden Thursday asked the nation’s financial regulators to assess and reduce the risks that climate change pose to the stability of the financial system.
Biden issued an Executive Order that “directs the development of recommendations for improving how Federal financial management and reporting can incorporate climate-related financial risk, especially as that risk relates to federal lending programs,” according to an administration fact sheet.
The order encourages Treasury Secretary Janet Yellen, in her role as chair of the Financial Stability Oversight Council to work with regulators to assess the risks and issue a report on how the council’s members plan to reduce the risks. The report should include actions that the member agencies are taking to improve climate-related disclosures and ways they are incorporating climate-related risk to the regulatory and supervisory activities, the administration said.
The National Credit Union Administration is a member of FSOC. As an independent agency, the NCUA is not subject to Executive Orders, but traditionally agency officials have said that they attempt to follow the spirit of such directives.
Yellen said Thursday that regulators face common challenges in making climate risk a high priority.
“Assessments of climate-related financial risks may require new perspectives and new tools,” she said, adding that FSOC will help identify common impediments and help find solutions to the problems. “As directed in the EO, I will engage with FSOC on all these challenges to issue a report later this year, including reporting on any actions the Council recommends to mitigate risks to financial stability,” she said.
Yellen first outlined her current view of climate risk as a high priority at a March FSOC meeting.
At the time, NCUA Chairman Todd Harper endorsed the effort. “For the NCUA, by measuring, monitoring, and mitigating such risks, we can we fulfill our core obligations of maintaining the safety and soundness of credit unions, protecting consumers, and safeguarding the Share Insurance Fund,” he said, in a statement at the meeting.
He said that most credit unions focus on mortgage, auto and small business lending, adding that climate change will affect the value of collateral, such as homes. He added that a credit union’s field of membership often is tied to a business, such as an oil refinery or a community that is closely tied to farming
“The movement to renewable energy and changes in weather patterns will affect their operations,” he said. “To remain resilient, such credit unions will need to consider adjusting their fields of membership or altering lending portfolios.”
Senate Banking Committee ranking Republican Sen. Pat Toomey of Pennsylvania said Thursday that the Biden Administration is preparing to misuse financial regulation to push environmental policy objectives. “Not only would such regulation exceed the scope of financial regulators’ respective missions and authorities, but it would also distort capital allocation, raise energy costs for consumers, and slow economic growth,” he said. He added that if Congress believes environmental laws do not adequately address risks from global warning, then Congress should change those laws. He said that financial regulators “have neither experience nor accountability” on the issue.