NY Climate Risk Expectations for Banks

New York’s Department of Financial Services (NYDFS), in an October 2020 letter, called on state-regulated financial institutions to integrate climate change-related financial risks into their business strategies, risk management processes and governance frameworks — becoming the first U.S. regulator to explicitly make that request. The agency suggests regulated organizations designate a board member or committee, as well as a senior management function, to be accountable for the institution’s assessment and management of climate change-related risks to credit, liquidity, reputation, operations, strategy and the market at large.

In December 2022, the New York Department of Financial Services released draft guidance that would provide lenders with guidelines about how they should prepare for intensifying extreme weather events and the clean energy transition. The proposal says the agency expects all state regulated banks and mortgage lenders to infuse climate considerations into their risk management processes and corporate governance structure. Also critical, the proposal says, is that banks provide equal services to all communities, including those most vulnerable to rising temperatures.