The guidance, adopted Dec. 21 by the New York State Department of Financial Services (NYDFS), is “designed to support institutions’ efforts to identify, measure, monitor, and control their material climate-related financial and operational risks in a manner consistent with current risk management principles,” according to the regulator’s press release.
The guidance follows up a September 2020 NYDFS industry letter outlining its expectations for regulated entities in New York on managing risks posed by climate change.
The NYDFS did not set a timeline for implementation of the guidance but instead will solicit feedback from regulated entities on their progress and challenges related to addressing climate-related risks through a request for information, to be issued in 2024.
The guidance placed climate-related risks into two general categories: physical risks and transition risks.
Physical risks can take the form of extreme weather, like hurricanes, floods, and wildfires, as well as the chronic change in weather patterns that can cause or exacerbate conditions like sea level rise, flooding and coastal erosion, droughts, and heat waves.
Transition risks involve economic and behavioral…
