ARLINGTON, Va.—How big of an impact are climate-related events having on credit unions? So far, according to a new survey, very little, but CU leaders say they are monitoring the risk.
In its newest Economic & CU Monitor, NAFCU asked credit union leaders about how climate change is affectingtheir portfolios and risk management.
NAFCU said most survey respondents reported the impact of climate-related events – including fire, flood, hurricane, and others – on their residential and commercial real estate portfolios was low or nonexistent. Of note, respondents had not experienced increasing climate-related losses in recent years, and their consistent message was that “historical risk management techniques are just as effective today as they have been,” NAFCU said.
Risk Management Strategies
According to the survey, CUs are also generally utilizing various risk management strategies to address climate and natural disaster risk. These strategies include:
- Monitoring properties in a special flood hazard area
- Requiring National Flood Insurance Program coverage or private flood insurance
- Engaging in loss mitigation efforts to help borrowers afford their loan payments after a natural disaster impacts the borrower’s financial condition
- Conducting risk assessments after a disaster
Rosier Outlook
Meanwhile, credit union leaders are feeling more optimistic about the future. NAFCU said its latest Credit Union Sentiment Index (CUSI), an index based on NAFCU member responses to eight questions on growth and earnings outlook, lending conditions and regulatory burden.
The CUSI rose slightly in April and has been relatively steady since the start of the year. Of note, nearly 80% of respondents reported a positive outlook on growth over the next 12 months, NAFCU said.