WASHINGTON, D.C. – New York Department of Financial Services (DFS) today issued “Proposed Guidance for NYS Regulated Banking and Mortgage Organizations Relating to Management of Material Financial Risks from Climate Change,” calling on financial institutions to perform regular scenario analysis and protect against climate-related financial risk. David Arkush, director of Public Citizen’s Climate Program, issued the following statement:
“Climate change and the clean-energy transition pose risks to the safety and soundness of financial institutions across the country. Until now, banking regulators solely focused their attention on protecting the largest and most sophisticated banks. The DFS guidance marks an important first step toward a flexible framework that covers all banks, including community banks that often act as the main source of credit to underserved and low-income communities. The guidance’s recognition that banks must not use climate-related risk management as an excuse to deny credit to these communities is its greatest strength.
“Unfortunately, this proposal is shorter on detail and ambition than similar guidance for insurers that DFS issued earlier this year. Importantly, it lacks the groundbreaking and critical recognition that covered entities can mitigate climate risk by reducing their financed emissions and by guiding their clients along the path to the clean-energy transition. Despite these shortcomings, the proposal would make real progress on mitigating the climate-related financial risks that New York banks face. We look forward to working with DFS to strengthen this proposed guidance and protect New Yorkers as it is finalized.”