First US state financial regulator joins NGFS

Channels: ESG, Policy, Insurance

Companies: New York State Department of Financial Services, NGFS

People: Linda Lacewell, Frank Elderson

The New York State Department of Financial Services (NYSDFS) has become the first US state financial regulator to join the Network of Central Banks and Supervisors for Greening the Financial System (NGFS).

It will also join the Sustainable Insurance Forum (SIF) of insurance supervisors.

Frank Elderson, chair of the NGFS and an executive director of supervision at Dutch central bank DNB, said: “As this is the first member from the US in this group of the willing, I see this as another encouraging sign of growing global momentum for greening the financial system in the financial regulatory community.”

The NYSDFS is a department of the New York state government responsible for regulating financial services and products, including those subject to the New York insurance, banking and financial services laws.

Linda Lacewell, NYSDFS superintendent, said: “As the federal government continues to deny climate change and rolls back important regulations designed to sustain our planet for future generations, New York is once again leading the way to contribute solutions to a real and growing problem."

Speaking at Environmental Finance’s Insurance and Climate Risk conference in New York last week, Lacewell said: “The DFS takes the threat of climate change seriously and expects the industries we regulate to do the same.”

Among other recommendations, she encouraged insurers in the state to “strongly consider” following the lead of others who have prepared a report in line with the recommendations of the Task Force on Climate-related Financial Disclosures.

Extreme weather events, such as recent flooding in upstate New York, are becoming more common, the NYSDFS said.

The organisation already requires its regulated insurers to have business continuity plans and submit annual disaster preparedness response plans to safeguard their operations. This helps to ensure they continue serving customers during a disaster, and NYSDFS provides guidance on how to do so, it said.

The NGFS was founded in December 2017 to enable central banks and supervisors to share best practices on how they can take action to minimise the risks posed by climate change to firms operating in their jurisdictions.

NGFS’s 42 members represent jurisdictions that account for more than half of all global emissions, and cover about two-thirds of the global ‘systemically important’ banks and insurers.

Central bank members include the Bank of England, Banque de France, Norges Bank, Deutsche Bundesbank, the European Central Bank and the People’s Bank of China. However, the US Federal Reserve is not currently a member.

The NGFS published a landmark report in April, and promised to develop, over the next 12 months, voluntary guidelines on scenario-based risk analysis and best practices for incorporating sustainability criteria into central banks’ portfolio management.

Michael Hurley