By Bentley Kapoor (India)
The Department of Financial Services, which is the financial regulator in New York, has issued a letter to companies throughout the state. The regulator has urged the firms to take greater actions for dealing with the financial risks that arise as a direct consequence of climate change. According to the regulator, all companies, including the ones dealing with Bitcoin and crypto mining, should take steps for assessing their risks that can arise as a result of climate change. Doing so would help them in coming up with a plan for mitigating these risks. This latest letter is in tandem with another document that was sent by the regulator back in September.
The previous letter had been specifically directed towards insurance companies that are operating across the state of New York. The risks of climate change were explicitly highlighted in the letter, including a reduction in economic output because of climate shock. This could result in an increase in asset devaluation, defaults, along with tighter lending criteria and widespread financial losses. The letters also made a reference to the risks of flooding and also shed some light on other events that could have a harmful impact on businesses and communities. This is in reference to events that could occur due to climate change in the years ahead.
Also read:In fact, the regulator went as far as mentioning crypto mining specifically, stating that the miners need to be fully aware of the effects of Bitcoin mining on the environment. According to the regulator, crypto mining can actually have a ‘sizable’ impact on the environment, especially when seen in relation to the value of the token. Consequently, the financial regulator is urging all crypto mining firms to increase their levels of transparency when it comes to the location as well as equipment of their crypto mining operations.
Heath Tarbert, the Chairman of the Commodity Futures Trading Commission (CFTC), had also issued warnings similar to New York’s financial regulators. The chairman had tried to create awareness of the impact of crypto mining on the environment as a whole. He stated that there were a lot of issues and the most prominent ones had to do with the environment. It is fully expected by the New York Department of Financial Services that all firms that have been sent this letter will do a risk assessment in relation to their operations. This assessment should take into account the risks that are associated with climate change and how they can impact the businesses in question.
This will allow these businesses to take the steps that are needed for reducing the direct and indirect impact of climate changes that are likely to occur. It is highly likely that moving forward, this issue would probably become part of compliance procedures for businesses. Currently, the DFS is developing a strategy that will allow it to add climate-related risks into its existing supervisory mandate. With climate change becoming a real and prominent problem, action will have to be taken.
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