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President Joe Biden last week signed an executive order to combat climate-related financial risks. Among its provisions, the order directs Treasury Secretary Janet Yellen to study and report on climate risks within the financial system in coordination with members of the Financial Stability Oversight Council (FSOC), which includes the NCUA and other financial regulators.

In addition, another section of the order – specific to the president's fiscal year 2022 budget proposal expected to be released soon – requires agencies to evaluate their budgets and assess the federal government's climate risk exposure. This may not directly impact the NCUA or CFPB, but could impact other agencies NAFCU works closely with such as the Small Business Administration (SBA) and Department of Housing and Urban Development (HUD).

Biden's FY2022 discretionary funding request released earlier this year proposed increasing funds for the SBA to provide access to capital to become more resilient to climate change, as well as new investments in HUD programs for rehabilitation and modernization to further climate resilience and energy efficiency – aimed at addressing climate change impacts, such as increasingly frequent and severe floods.

Yellen previously discussed the administration's efforts to address climate risks posed by climate change and identified three challenges:

• the lack of data needed to appropriately assess climate change risk, indicating that more regulation and supervision may be needed;

• the long-term nature and unpredictability of climate change, which could require new, long-term approaches for assessing risk, such as new scenarios and stress-testing requirements; and

• climate change science is relatively new to the financial services industry, but swift action is needed to address threats posed.

FSOC and federal housing agencies have already taken steps to analyze and address climate risks. NAFCU recently provided feedback to the FHFA on the risks climate change and natural disasters pose to the housing finance system and advocated for coordinated efforts among FSOC and other federal agencies.

NAFCU will continue to monitor and engage in these efforts. The association has offered support for FSOC and other agencies to coordinate efforts on climate risk policies to ensure stability.