Climate-related financial risk is a growing concern for regulators. Financial services organizations can take proactive steps as they await guidance.
In recent months, regulatory agencies have taken preliminary actions regarding the risks associated with climate change and how the banking industry should respond. The relevant regulatory agencies have not yet issued specific guidelines or reporting requirements for financial services organizations such as banks, credit unions, and bank holding companies to follow. However, concern over climate-related financial risk is gaining momentum along with other aspects of the broader environmental, social, and governance (ESG) priorities.
As some banks and credit unions begin to develop comprehensive ESG strategies and address ESG-related risk management issues, in the absence of specific requirements, challenges remain over how best to manage climate-related financial risks as the regulatory environment evolves. Bank leaders also wonder what steps – if any – they should be taking now to prepare for anticipated future regulations governing climate-related financial risk. In this overview, we hope to help demystify the current regulatory landscape and provide banks and credit unions with some perspective as they prepare for more specific guidance and direction.