Superintendent Linda A. Lacewell today announced that the New York Department of Financial Services (DFS) has recommended that the Securities and Exchange Commission (SEC) establish decision-useful, consistent, comparable, and reliable climate change disclosure requirements, in response to a request for input by Acting SEC Chair Allison Herren Lee. Climate-related financial disclosures are critical in helping investors, lending institutions, and insurance underwriters appropriately assess and price climate-related risks and opportunities.  In a comment letter, DFS commended the SEC for focusing on the financial risks from climate change and seeking broad input as it develops climate-related disclosure requirements. 

 “Climate change is one of the defining risks of our time," said Superintendent Lacewell. “Developing and managing standards for the disclosure of risks related to climate change requires collaboration among state and federal regulators and the industries that they regulate. We look forward to working with the Commission to secure a sustainable future for our financial system and the people that it serves.”

DFS is the first and only U.S. financial regulator to establish a holistic set of expectations on managing the financial risks from climate change. As the regulator of insurance companies, banking and other financial institutions, and public and private pension plans in New York State, DFS believes that sound climate change disclosure is essential for its regulated institutions to manage their financial risks related to climate change.

Many large DFS-regulated institutions, especially insurance companies, have communicated to DFS that the lack of such data is a major impediment as they seek to manage their climate-related financial risks.  As many of these institutions are public companies already subject to SEC disclosure requirements, DFS is also sensitive to the disclosure burden that might be placed on them. In addition, DFS commends the SEC’s focus on protecting all investors, including individual investors.

 In the letter, DFS recommends that the SEC:

• Require consistent, comparable, and timely disclosures on governance, business strategies, and risk management related to the material risks from climate change that companies face;
• Take a proportionate approach that reflects each institution’s exposure to climate risks and the nature, scale, and complexity of each institution’s business; and
• Balance disclosure requirements and regulatory burdens while coordinating with other regulators.

DFS has taken several actions to bolster its commitment to addressing the financial risks from climate change.  DFS became the first U.S. state banking regulator to join the Network for Greening the Financial System (NGFS), a leading international coalition of ninety-one central banks and financial supervisors dedicated to mobilizing the financial industry to address climate change.  In addition, DFS joined the Sustainable Insurance Forum (SIF), an international network of insurance supervisors seeking to find collaborative ways to help the global insurance industry meet the challenges posed by climate change.  DFS issued a proposed Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change. Recently, DFS issued a new report on New York domestic insurers’ exposure to the financial risks arising from society’s transition to a low-carbon economy.

Read a copy of the submitted letter on the DFS website.

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