WASHINGTON, D.C. – With the closing of the comment period for New York Department of Financial Services’ (NYDFS) guidance for banking and mortgage institutions on managing safety and soundness risks related to climate change, consumer advocacy and environmental organizations called on the state regulator to strengthen the guidance by directing financial institutions to reduce financed emissions, asses customers’ transition plans, and publicly disclose climate risk and mitigation strategies.
In a comment led by Public Citizen, and supported by 25 other organizations, advocates on Friday called on the regulator to do even more to confront the threats that banks and communities face, by applying similar key climate risk mitigation measures in DFS’s issued guidance to insurance providers.
“The guidance from NYDFS sets a benchmark for U.S. regulators seeking to prepare for the consequences of climate on our financial institutions by including smaller financial institutions in climate risk supervision,” said Mekedas Belayneh, policy advocate with Public Citizen’s Climate Program. “The recent collapses of SVB and Signature Bank are stark reminders that regulators cannot sleep at the wheel. New York’s move sets an example for other states and federal regulators that climate change poses financial risks to all banks, not just the largest ones. The Department of Financial Services can’t rest on its laurels, it has the opportunity to set a gold standard by strengthening the guidance.”
The letter to regulators also commends DFS’s proposed guidance as the strongest climate-driven regulatory actions to protect low- and moderate-income communities and communities of color from potential disinvestment or efforts to raise the costs of credit.
“The New York DFS guidance rightly focuses on preserving climate-vulnerable communities’ access to banking services in the face of worsening climate harms,” said Alma Musvosvi, climate justice policy coordinator at Americans for Financial Reform Education Fund. “As a result of historical racist redlining practices, Black neighborhoods are most likely to be based in climate-vulnerable areas, and they are being exposed to even further financial deterioration as insurance companies and banks pull out of areas that are designated high-flood risk zones–a practice known as bluelining–just when communities need access to capital most to build climate resilience. Bluelining by financial institutions will only compound the economic disparities communities already face and potentially further exacerbate the racial wealth gap. DFS must promote equity in climate-vulnerable communities by requiring fair lending assessments to make sure that Black and Brown communities are no longer forced to bear the disparate impacts of bank bluelining.”
Over the coming weeks, New York Regulators will consider the comments and will prepare to issue the final rules for banks and mortgage organizations.
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