“The Changing Climate for Credit Unions,” a report produced by the Filene Research Institute and the Ceres Accelerator for Sustainable Capital Markets, stresses climate change is not a problem for the future but a moment of truth for today.
Therefore, researchers believe it will require transformational change to confront, adapt, and deal with this challenge.
The National Oceanic and Atmospheric Administration estimates the U.S. lost $145 billion and 688 lives in 2021 due to climate change. A 2021 U.S. Financial Stability Oversight Council report called on member regulatory bodies, including NCUA, to begin planning to mitigate climate-related risks.
According to the report, 60% of U.S. credit unions are in locations that are at risk from damage due to extreme weather events.
“This report asks the industry to conduct a self-examination of its contributions to climate change, educate and mobilize stakeholders, co-create climate solutions, take bold steps, and leverage resources and social networks to accelerate progress toward a better climate future,” says Dr. Mai Thi Nguyen, a Filene fellow for community social impact.
To help mitigate the effects of climate change, the report suggests credit unions look inward at their products, practices, and investments; look outward to help their communities build resilience to climate change; and come together as an industry to formulate shared visions, values, and practices.
More specifically, the report recommends credit unions pursue seven action steps:
1. Publicly acknowledge that climate change poses a risk to their balance sheet and to their members.
2. Conduct research and educate themselves, their members, and other stakeholders about climate-related risks and opportunities facing their organizations.
3. Collect climate-relevant data for their organization.
4. Adopt the recommendations of the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures.
5. Conduct a climate scenario analysis of their loan portfolios to better understand the unique climate-related physical and transition risks in their balance sheet and business model.
6. Invest in their organizations while leveraging partnerships and building system-wide resources.
7. Foster proactive communication among credit unions, national trade associations, state leagues, policymakers, and state and federal regulators.
These changes can help put credit unions on a path toward climate justice, which Nguyen defines as “a system in which the detrimental impacts of climate change are not disproportionately borne by select social and demographic groups.
“Can we envision a future where we do more good than bad for the planet; where we have systems of equity and justice in which all families have the opportunity to thrive, succeed, and have healthy lives; and where credit unions are reaping financial benefits by maximizing their social impact? I believe we can.”