Components of Climate Change for Credit Unions
September 7, 2022
Credit Unions across the country are currently discussing how to ensure that financial services facilitate sustainable practices and address climate change. Industry conversations on this topic can be found globally and locally . The Central Bank of Ireland (CBI) has been forthright in describing the need and role Credit Unions can play in addressing climate change. However, that’s not to say it is an easy problem to tackle. This growing issue has evolving solutions and regulatory considerations with learning still ahead on data collection, measuring and monitoring practices. As Credit Unions look at where to start it’s important to consider both sides of the issue: the market need to finance carbon neutral and other renewable solutions; and the underlying risks climate change poses to the cooperative.
Addressing Market Needs
Identifying how to address climate change and the best way for your Credit Union to contribute to the solution will involve strategic and business model planning. Transitioning to a carbon neutral future means new business and consumer needs to facilitate the change. Funding for renewal sources of energy such as solar panels, supporting businesses transition to energy efficient methods, new construction and building practices create new opportunities and needs for financing and other financial services.
Climate Related Risks
Incorporating climate risks across your overall risk framework is critical not only for the strength of the Credit Union but also to meet CBI guidance. Identifying new risks and controls, stress testing for future climate outcomes, the potential financial consequences to capital adequacy and the impact to loan collateral are just a few areas in your risk framework to consider. While the regulatory guidance continues to evolve, CBI has provided initial guidance. Both mitigating climate change risks and positioning the Credit Union’s products and services to support sustainable practices should be included in a Credit Union’s action plan.
Identifying experts or point people within the Credit Union team and ensuring climate change considerations are embedded into the strategic plan are great starting places. As members of the board create their own action plan, tracking and monitoring risks and initiatives are foundational elements to establish early in the process. Credit Unions should consider the enterprise level tools the team are using to monitor overall progress with their strategic planning initiatives and governance reporting.
Mobilising finance to facilitate the transition to a sustainable economy and addressing an evolving area of risk and regulation is a significant task that is best approached with education and collaboration. With industry trends continously evolving it is essential for Credit Union members to stay up to date and take each educational oppourtunity that arises. Attending Credit Union trainings and opportunities to learn from others within the industry is vital. A great example of an upcoming educational opportunity is this years CUMA Autumn conference in Athlone. We’ll be attending to join the discussion.