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Credit union agency won't discourage lending to ag and fossil fuel industries

The NCUA has revised its strategic plan to clarify that the agency will not take regulatory action based on “climate-related financial risks” to discourage credit unions from lending to “family farms and others in the agricultural sector as well as businesses tied to the fossil fuel industry.”

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The National Credit Union Administration has revised its strategic plan to clarify that the agency will not take regulatory action based on “climate-related financial risks” to discourage credit unions from lending to “family farms and others in the agricultural sector as well as businesses tied to the fossil fuel industry.”

The National Credit Union Administration, an independent federal agency that insures deposits at and regulates credit unions akin to how the Federal Deposit Insurance Corporation regulates banks, last fall released multi-year strategic plans that “outline the NCUA's strategic and performance goals along with the critical factors that affect the achievement of these goals.”

A section in the draft of the strategic plan, titled “Climate-Related Financial Risks,” explained that credit unions often are tied to particular industries or communities, and if those industries or communities have severe impacts from climate change or regulations aimed at cutting the effects of climate change, the credit unions could suffer.

“To remain resilient credit unions may need to consider adjustments to their fields of membership as well as the types of loan products they offer,” the draft said.

While that portion remains in the new version of the plan, the strategic plan now includes a section discussing that the NCUA Board does not want to discourage lending to industries that could be impacted by climate change:

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“Credit unions, not the NCUA, are best positioned to assess various risks and opportunities within their field of membership. Credit unions will need to make their own decisions on diversification and expanded fields of membership. The agency does not intend to micromanage credit union lending decisions for climate financial risk, including lending to family farms and others in the agricultural sector as well as businesses tied to the fossil fuel industry. The NCUA Board underscores that nothing in this Strategic Plan should be construed as discouraging activities related to agriculture or fossil fuels.”

A number of North Dakota officials spoke out about the original draft language and asked NCUA to rethink it , including Gov. Doug Burgum, members of the Congressional delegation, and Jeff Olson, the CEO of the Dakota Credit Union Association, the professional financial trade association serving 69 credit unions in North Dakota and South Dakota.

However, even at the time that the officials spoke out against the language, NCUA Chairman Todd M. Harper in a statement denied that the strategic plan would keep credit unions from lending to agricultural producers, using language that closely mirrors that which ended up in the strategic plan.

“The NCUA will not micromanage any lending for climate financial risk. This includes lending to family farms and others in the agricultural sector, as well as businesses tied to the fossil fuel industry," Harper said in January. "Moreover, any change in NCUA policy and supervision related to climate financial risk must be agreed upon by NCUA Board action.”

Burgum, in a statement on Thursday, March 18, said he would have preferred to see the climate risk language removed entirely.

“We appreciate the NCUA Board clarifying its position so that credit unions know they can continue to provide financial services to our farmers, ranchers and energy industry without fear that such activity will put them in the crosshairs of federal regulators,” he said. “North Dakota continues to be a leader in carbon capture, utilization and storage efforts, recognizing that carbon neutrality can be achieved only through innovation, not regulation.”

Sen. John Hoeven also cheered the news.

“Farmers and ranchers not only serve as the foundation of North Dakota’s economy, they help ensure that every American continues to have access to the highest quality, lowest cost food supply in the world,” he said. “As such, our nation’s agriculture producers deserve our support, and we appreciate NCUA responding to our concerns and clarifying that credit unions will not be discouraged from lending to those in the agricultural sector.”

Jenny Schlecht is the editor of Agweek and Sugarbeet Grower Magazine. She lives on a farm and ranch near Medina, North Dakota, with her husband and two daughters. You can reach her at jschlecht@agweek.com or 701-595-0425.
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