Credit Union Trades: NCUA Should Not Issue Climate Risk Rules

Learn why both CUNA and NAFCU say the NCUA should focus on guidance and support for credit unions opposed to issuing regulations.

David Baumann


Jun 28



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David Baumann

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David Baumann

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CUNA and NAFCU say agency should focus on guidance and support opposed to any regulations.

The NCUA should not adopt regulations governing climate change issues at federal credit unions, the two national industry trade groups told the agency this week.

“The NCUA should focus on providing credit unions with the resources they need to manage climate-related financial risks, rather than imposing any new regulations that will only hamper their ability to continue serving their members,” Luke Martone, senior director of advocacy and counsel at CUNA, told the agency in a letter.

“Climate risks to the financial system are significant, but currently, the best way to address them should be an ongoing dialogue and the diligent voluntary efforts of credit unions,” James Akin, senior regulatory counsel at NAFCU, wrote to the NCUA.

Backstory and Context

The two trade groups were among those commenting on an NCUA request for information on if and how the agency should deal with climate issues.

The Financial Stability Oversight Council (FSOC) has stated that climate change is a substantial risk for the nation’s financial system. In October 2021, the council adopted a report recommending that all financial regulatory agencies review current regulations to ensure that rules take climate risk into account and, where necessary, consider issuing rules to address the issue.

The NCUA and Climate Change

The NCUA is an FSOC member and agency Chairman Todd Harper voted in favor of the report.

When the issue came before the NCUA board however, Republican members Kyle Hauptman and Rodney Hood made it clear they would oppose any regulation dealing with climate change—emphasizing that it is an issue that credit unions, and not regulators, should handle.

Hood’s term on the board expires in August and President Biden is likely to nominate a Democrat to replace him. That would give the Democrats control of the board, affording them the power to issue guidance or regulations dealing with climate change.

Other Interested Parties

While the credit union trade groups said the agency should take a hands-off approach, environmental groups told NCUA officials that additional action is needed.

“We urge the NCUA to ensure that credit unions begin to identify their material climate-related financial risks, and incorporate the management of those risks into their existing corporate governance, internal control, and risk management frameworks,” the Natural Resources Defense Council said, in a letter to the agency.

At the same time, a trade group representing the oil industry said the agency does not have the power to address the issue.

Inside the Comments


Martone said that CUNA would oppose any plan that would establish mandatory reporting procedures for credit unions. The trade group also said the agency should not adopt any policy that would prevent credit unions from making independent business decisions.

“Credit unions know their operations, fields of membership, individual members, and potential risks best, certainly better than the NCUA, which appropriately focuses on the industry on a broad scale,” he wrote.

He added that if the agency decides it must do something, it should issue informal guidance or educational resources.


Akin wrote that unless Congress orders the NCUA to do something specific, the agency should defer to FSOC as it develops guidance. That way, he said, credit unions would not be unfairly burdened as compared to other financial institutions.

“Climate-related financial risk is real and significant; however, it is as yet unclear that it is an existential risk in comparison to other risks already facing credit unions,” he stated.

NAFCU also questioned the accuracy of an NCUA study that found one quarter of all federal credit unions are located in communities that have a relatively or very high risk of experiencing negative effects from natural hazards. The agency also reported that those credit unions hold 34% of system-wide assets.

The study took into account issues that may not directly relate to property damage caused by natural disasters, Akin wrote.

In addition, he said, the evaluation focused on the location of credit union headquarters without considering assets spread among multiple counties and the NCUA also used county-level aggregation rather than the more detailed census tract data.

He noted further that there is no established standard for evaluating climate-related physical risks.

NAFCU did its own research using Home Mortgage Disclosure Act data and reported that rather than 34% of all assets being located in high-risk areas, the figure is just over 11%.

Akin added that opposed to regulations, federal agencies should focus on providing support and guidance to credit unions.

“The NCUA can help institutions address physical risks by sharing best practices and providing guidance, promoting information sharing, and encouraging research and development,” he wrote.

He said credit unions also would benefit from clarity from the NCUA regarding how agency examiners will evaluate risk management strategies.

Natural Resources Defense Council

In its comment letter, the council urged the NCUA to ensure that credit unions begin to identify the material risks that climate change poses and adopt strategies for dealing with the issue.

“As climate change intensifies, so will the danger that it poses to financial institutions,” the council said. “Climate-related risks, whether physical or transitional, threaten credit unions’ ability to function in a safe and sound way.”

He added that the NCUA and credit unions should be pushing for stronger “climate-smart” building codes, zoning ordinances and land-use regulations.

“In particular, the NCUA should outline best practices by which credit unions can incorporate climate-related risk data, to the extent that they have it, into existing regular internal risk reporting workstreams,” the letter states.

Environmental Defense Fund and the Institute for Policy Integrity at NYU Law School

The NCUA should consider requiring credit unions to incorporate climate risk into reports they file with the agency, according to a joint letter submitted by the Environmental Defense Fund and the Institute for Policy Integrity at New York University Law School. Such a requirement, the groups maintain, would help spur better risk identification and management practices.

Western Energy Alliance

The alliance, which said it represents 200 companies engaged in “all aspects of environmentally responsible exploration and production of oil and natural gas across the West,” questioned whether the NCUA has a congressional mandate to do anything about climate issues.

“We strongly object to any NCUA climate change regulation aimed at eliminating the use of oil and natural gas, particularly in the absence of an alternative that does everything that oil and natural gas do and in the absence of statutory authority,” their letter states.

The group added that Environmental Social and Governance, as well as climate change advocacy has had a negative impact on the industry’s access to banking.

And the letter was blunt in its criticism of any agency action on climate change.

“NCUA is a financial regulator, not an environmental regulator with expertise in climate modeling and risk analysis,” the alliance wrote. “NCUA does not have the expertise or administrative ability to assess the veracity, or lack thereof, of any FICU-specific speculative analysis regarding climate-related risk.”

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