$269 billion in California credit union assets face climate risk losses

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Wildfires and other disasters can strike at any time, leaving more than personal devastation in their wake. They can also damage financial institutions, according to a report released last month by the Filene Research Institute which warns that more risks are at hand.

The first-of-its-kind study titled “The Changing Climate for Credit Unions” conducted by industry think tank Madison, Wisconsin, highlights that 60% of credit unions are at risk of climate-related losses from disasters.

These tragic climate-fueled events cannot only upend the lives of residential and commercial owners. They put lenders at risk.

The Filene Research Institute, in coordination with Boston-based Ceres Accelerator, which studies banking and financial trends, found that $1.2 trillion in US assets remain at risk “due to climate change”.

In California, 1,526 credit union branches managing about $269 billion in assets and $147 billion in loans are considered “at risk,” Filene Research reports.

Last year, the United States suffered losses amounting to $145 billion in property damage and 688 lives as a result of extreme weather events, the National Oceanic and Atmospheric Administration estimated. NOAA added that 40% of US residents live in counties affected by weather disasters.

Longtime Santa Rosa resident Tracy Condron experienced one fateful night in October 2017 that she never slept in, when ash rained down, covered and turned her dark-colored Trex deck into a light gray, signaling that it was time to go.

“The wind was something I’ve never experienced, and the sound I remember is of propane tanks exploding,” she said of what Bay Area meteorologists said. call the winds Diablo.

When she triggered the garage door to drive away at 1 a.m., she noticed the wind was raging so hard it had blown a pile of leaves higher than her car.

“You know, people say, ‘What would you take?’ I couldn’t see. I wore a headlamp. But I could see flames coming over the hill, she said, referring to the crest of Fountaingrove Parkway. She escaped to a law firm near Stony Point Road who confirmed the inevitable tragedy. Tubbs’ fire consumed his home in Fountaingrove, among thousands of other residents and businesses. The fire raged through the city, also taking out the former Hilton Sonoma Wine Country hotel and nearby Paradise Ridge Winery.

“This one (a wildfire) took out so many homes,” said Condron, communications manager for Redwood Credit Union.

One of the report’s suggestions is “what credit unions can do to respond to the climate crisis.” Examples can include internal efforts that support their employees or outreach that benefits the wider community, the report says.

Redwood Credit Union, in partnership with California Senator Mike McGuire, D-Healdsburg and the Press Democrat newspaper, opened the North Bay Fire Relief Fund within 48 hours to benefit victims and survivors of the 2017 wildfires. (The North Bay Business Journal is owned by the same company as Press Democrat, which is Sonoma Media Investments.)

The North Bay Relief Fund, run by the nonprofit founded in 2013 as RCU, has raised more than $32 million from 41,000 donors in every US state and 23 countries to help victims of the 2017 fires.

“When disaster strikes, credit unions need to make sure their members have access to their money, so focusing on business continuity is critical,” said Redwood Credit President and CEO Union, Brett Martinez, at the Business Journal. “Credit union leaders have had many discussions about this over the past few years, sharing their experiences, preparedness practices and also offering support to other credit unions in the event of a disaster.”

Nationally, the National Credit Union Foundation established “CUAid,” a disaster relief fund for credit union employees affected by disaster.

“Many of these losses can be offset through insurance. The most detrimental impact that credit unions see is the impact on operations due to what happens to its employees,” the spokesperson said. California/Nevada Credit Union Leagues, Matt Wrye.

The regional trade group is hosting a seminar on July 12 designed to explore impact and share solutions by expert panelists. Since suffering member wildfires in 2015, 2016, 2017 and 2019, Redwood Credit Union can be considered a panelist, Wyre noted.

More from the world of finance

A similar climate change study for banks came out in October 2021 from the Biden administration’s Financial Stability Oversight Council. The FSOC, created under the Dodd-Frank Wall Street Reform and Consumer Protection Act, is tasked with identifying risks to the financial security of the United States.

In doing so, it also released a first-of-its-kind study tasked with identifying “climate change as an emerging and growing threat to the financial stability of the United States,” the US Treasury reported.

The study advises banks to assess their levels of exposure to climate change-related disasters, provide information to investors and create a database to measure risk.

The U.S. Securities and Exchange Commission has joined the fray by evaluating its disclosure rules and seeking public comment on the matter. Additionally, the Federal Reserve Board has created two committees to develop a better understanding of the risks.

Economists across the region are sitting back and taking note of the risks looming around the corner.

“With the slow evolution of climate risk, in the long term, banks will need to have riskier assets,” said Robert Eyler, professor of economics at Sonoma State University. “That’s when the weather becomes normal with more extreme conditions there is a higher probability of risk.”

Susan Wood covers law, cannabis, manufacturing, technology, energy, transportation, agriculture, and banking and finance. For 27 years, Susan has worked for various publications, including the North County Times, Tahoe Daily Tribune and Lake Tahoe News. Contact her at 530-545-8662 or [email protected]


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