New York’s Chief Financial Regulator Promised Climate Action This Year. Where Is It?

ADRIENNE HARRIS HAS said she’s serious about taking on climate change. As New York’s chief financial regulator, Harris has repeatedly emphasized the importance of using her position to address the global crisis. She created a climate division within the Department of Financial Services, the state agency she runs. As its biggest climate initiative this year, the department was supposed to issue instructions on how New York banks should respond to climate change-related risks.

That hasn’t happened.

Harris publicly said that the department would issue the guidelines before the end of 2022, and in September, speaking at an event sponsored by the nonprofit Citizens Budget Commission, she said they would be “a model that other states could follow” and would be released “in a couple of weeks.”

The instructions have not been published yet even in draft form. As the year winds to a close, there’s no indication of when that might change. 

“We haven’t heard anything on specific progress,” said Yevgeny Shrago, policy director of the nonprofit group Public Citizen’s climate program, who has been meeting with the department’s employees in recent months. “It seems like it’s a little stalled.”

A spokesperson for the department told New York Focus the guidance is “forthcoming,” but did not provide details about the delay or the current timeline.

Governor Kathy Hochul nominated Harris, a former Obama administration official and finance executive, to serve as the head of the department in August 2021, and Harris began serving as acting head soon after. Progressives tried to block her confirmation over her close ties to the financial industry, arguing that someone who has worked for and advised numerous financial technology companies and expressed worries about overregulating finance was a poor fit for the job of top financial regulator in the home of Wall Street. But their effort failed, and the state Senate confirmed Harris to her post by a wide margin in January of this year.

READ MORE: Senate Number Two Joins Mounting Opposition to Hochul’s Pick for Top Financial Regulator

The Department of Financial Services is in charge of setting the rules for banks that operate in New York. It oversees more than 3,000 financial institutions that control over $8 trillion in assets. 

To deal with climate change, it could ask banks to do things like model the impact of rising sea levels on their businesses, or estimate the financial impact they’ll face as the economy transitions from fossil fuels to renewable energy. The department issued similar rules last year for the insurance industry, asking insurance companies to publicly disclose their strategies for responding to climate change and appoint a board member to be responsible for managing climate risk, among other steps.

Such guidance would let banks know what changes are necessary to remain solvent and keep customers’ money safe as climate change worsens, and it would help consumers judge which banks are taking climate change seriously.

Without guidance, “there could be banks that are unprepared, and that could affect their balance sheet and ultimately, their financial stability,” said Steven Rothstein, managing director of the Ceres Accelerator, a nonprofit that promotes sustainability in the business sector. 

Instructions like these are not binding, but they’re still generally able to shape the way that businesses operate, since they represent the regulator’s interpretation of what existing law requires. Businesses that flout them risk being sued.

“Everything that happens inside a bank is done with an eye towards what a bank regulator is going to think about or see when they come in,” said Ivan Frishberg, chief sustainability officer at Amalgamated Bank, which is the largest union-owned bank in the country and works closely with clean energy companies and labor unions.

Amalgamated Bank has already taken significant action on climate change voluntarily. It doesn’t lend to fossil fuel companies; it offers ways to invest in green energy and avoid fossil fuels; and its net-zero emissions plan was approved by the Science Based Targets Initiative, an organization that helps businesses develop plans to reduce their emissions.

Without incentives for other banks to take similar steps, Frishberg said, Amalgamated risks placing itself at a competitive disadvantage compared to banks motivated only by profits.

“We want to forge new ground. But there are risks with doing that,” Frishberg said. “We also want to move the market.”

UNDER HARRIS’S PREDECESSOR, former Superintendent Linda Lacewell, the Department was a nationwide leader in addressing climate change — though that’s in part because nearly all other states were doing very little on the topic.

In October 2020, Lacewell released a letter highlighting her intent to focus on climate-related regulation as a major priority. In November 2021, the department followed up with a first-in-the-nation set of instructions on how the insurance industry — whose practices also fuel climate change — should deal with climate risk. The guidelines encouraged insurance companies to “do their part” to move the economy away from fossil fuels and help “support communities’ resilience to climate change,” among other initiatives.

Harris was acting superintendent at the time, but most of the work on the instructions took place during Lacewell’s tenure.

Also in November 2021, the department sent a letter to the federal Treasury Department, encouraging them to expand their initiatives on climate change and insurance regulation. 

But in the past year, action has slowed. In September, Nina Chen, the climate division’s head who had spearheaded the department’s climate change initiatives in recent years, left New York to take a similar job at the federal Treasury Department. Chen declined to comment.

A final version of the instructions for banks likely won’t be completed before mid-2023, at the earliest. 

That’s because the department generally gives industries and the public a chance to give feedback before it finalizes new rules, which can delay the process by months. The first draft of the insurance guidance was released in March 2021, half a year before the final version took effect. 

Action from New York could prompt other states to implement similar policies, Rothstein said. No other state or federal regulator has yet issued guidelines for how banks should respond to risks from climate change.

“There’s a real need to catalyze national action,” Shrago said.

If the department doesn’t move forward with the banking guidelines, the legislature could try to prod it into action by sending letters or holding hearings, Shrago suggested. 

Senator James Sanders and Assemblymember Patricia Fahy, chairs of their chambers’ banking committees and both Democrats, did not respond to requests for comment.

Time is in short supply. “We are already at about one and a quarter degrees of warming, and well on our way to exceed the 1.5 degree threshold,” Frishberg noted, referring to the number believed to be necessary to avert the worst effects of global warming. “When it comes to climate change, speed and scale are the key words.”