As the Biden administration prepares to take office, financial regulators have a renewed opportunity to work with each other and the industry to manage the financial risks from climate change after years of obstruction by the Trump administration.

As has been well-documented, the Trump administration has actively undermined progress on climate change for the past four years. One of the latest blows came from the U.S. Department of Labor, which issued a final rule on Nov. 13, 2020, discouraging environmental, social and governance investing by private pension plans — which my agency, the New York Department of Financial Services, opposed.

Similarly, the U.S. Office of the Comptroller of Currency adopted an unduly fast-tracked and controversial rule on Jan. 14, 2021, mandating large banking institutions to provide financial services to certain industries, such as oil and gas industries.

Addressing the financial risks of climate change is obviously a major undertaking. But as U.S. Supreme Court Justice Ruth Bader Ginsburg said, "Real change, enduring change, happens one step at a time." In other words, small steps that are part of a larger strategy can add up to big change.

To paraphrase Martin Luther King Jr., we do not need to see the whole staircase before taking the first step.

The steps the DFS has taken to make sure our regulated financial institutions and insurers address climate change were not easy. But they are beginning to raise awareness and produce results and will continue to bear fruit in the future.

Here are some suggestions based on our experience.

1. Don't reinvent the wheel.

It was clear from the beginning that our European counterparts were ahead of the U.S. So in the early stages, we met with European regulators from the Bank of England and the Banque de France to learn what worked for them and what didn't.

2. Seek expertise and make sure you have talent in place.

Our first step was hiring a director of sustainability and climate initiatives to lay the groundwork for our policies and practices and engage with the banking and insurance industries to address the financial risks from climate change.

3. Engage with fellow financial regulators.

We engaged with European regulators to address the issue as a supervisory matter. In 2019, the DFS became the first U.S. financial regulator — state or federal — to join the Network for Greening the Financial System, which brings together central banks and supervisory authorities to contribute to the development of environmental and climate risk management in the financial sector.

The Federal Reserve Board joined the NGFS in December 2020. The DFS is also a member of the Sustainable Insurance Forum, a network of international insurance regulators.

4. Collaborate with industry.

Last fall we issued industry letters containing a set of expectations for our regulated financial institutions to integrate the financial risks from climate change into their governance, risk management and business strategies, the first state or federal regulator to do so.

This is critical for the safety and soundness of the financial services industry. Understanding that our regulated financial institutions range from the very small to global multinational financial and insurance firms — with total assets of $7.3 trillion, we recommended taking a proportionate approach.

Engaging with the industry is critical to developing DFS policies and directions. We can learn from each other and must talk to each other.

Our industry letters have been well-received by the financial services industry. They appreciate the proportionate approach the DFS is taking. We have also been arranging climate-related knowledge exchange webinars with participation from members of the insurance industry. More than 500 attendees from more than 200 companies joined our first seminar in December.

Regulators and regulated financial institutions must be engaged and exchange information so that policies and directions are tailored and effective.

5. Don't get bogged down in bureaucracy.

It's important to study the issues before engaging with industry and laying out a strategy, but it is equally important to act promptly. Government has a reputation of suffering from bureaucratic inertia. But waiting is also a decision, and we don't have time to wait. In the DFS' case, it was less than a year between the time we joined the NGFS and when we issued our industry letters.

6. Break down silos.

Look for ways to break down silos. Last year the DFS formed a partnership with our sister state agency, the New York State Energy Research and Development Authority, to work with industry to accelerate the creation of innovative insurance and financial products to speed up the development and deployment of key low-carbon technologies.

We have to be creative enough to use all the tools we have available and engage with the financial institutions we regulate, with our fellow regulators, along with experts in the field and advocacy groups, to harness knowledge and continue to build momentum.

Climate change affects us all, generations into the future, disproportionally affects low-income communities and communities of color, and feeds into the vicious cycle of social inequality.

We cannot afford to continue operating in separate worlds when the one we share is on fire.

The past and ongoing crises that financial regulators and the financial services industry have faced together demonstrate that we have greater impact by working together. By resolving to take the first steps — together — to address financial risks related to climate change, we can arrive at the destination we all desire: a more sustainable future for all.

Linda A. Lacewell is superintendent of the New York State Department of Financial Services and a member of Gov. Andrew Cuomo's cabinet. She is also an adjunct professor at New York University.

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The opinions expressed are those of the author(s) and do not necessarily reflect the views of the organization, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.