As Prepared for Delivery on November 14, 2022
Thank you very much. It’s my pleasure to join you this morning at the Fifth Annual “United in Sustainability Summit.” Credit unions began in America over a century ago, and sustainability has long been a part of their DNA as it has served as a differentiator in a highly competitive marketplace where credit unions continually demonstrate the “People Helping People” ethos.
Hats off to our conference conveners, United Nations Federal Credit Union and the Organization of American States Federal Credit Union, for their leadership in bringing us together to discuss current sustainability activities and opportunities to bolster impact. I’m especially delighted to see such a tremendous turnout and if I understand correctly, we also have a substantial number of participants joining us virtually. That’s great because the issues we’re focusing on today are immensely important for the future of the credit union industry. So, I’m pleased to see so many people taking an interest in today’s discussions.
And to tell you the truth, it hasn’t always been that way. I’ve been working in and around the financial services industry for several decades. My first job in the industry was as a commercial banker, and later as a Community Reinvestment Act Manager at a financial institution in my native North Carolina, where I worked on affordable housing and small business lending, with a heavy emphasis on reaching marginalized and underserved communities.
From an early stage in my career, I was focused in one way or another on issues related to community development, corporate responsibility, and addressing financial disparities. Now, back at that time, I don’t think we referred to these as “sustainability” issues, but that’s essentially what they were. And I’ve continued working on many of those same issues throughout my career, both in the private sector and now in the public sector.
In the early stages of my career, though, these were not central issues in the financial industry. Sometimes I joke that it’s almost like I chose a career path for myself within the financial services field that was guaranteed to keep me out of the corner office because if you go back just a couple of decades, these issues that we now categorize under the broad heading of “sustainability” — financial inclusion, community development, diversity, corporate responsibility — weren’t necessarily seen as the path to executive leadership.
But that’s changed dramatically over the years, and for the better. Now with our focus on sustainability, these issues are much more central to the mission of the credit union industry. They’re gaining in importance all the time, especially as credit unions seek to attract younger members – millennials and Gen Z. Younger generations demand that organizations they do business with or work for embrace sustainability. This is why we can have an event like this, with such outstanding participation, which I think is fantastic.
To preface our discussion, I’d like to offer some introductory remarks about how I see credit unions integrating the sustainability agenda into their business plans from my perspective as a federal regulator. To be clear, I will note that I am one of three appointed board members for the National Credit Union Administration (NCUA). As such, I’m speaking not on behalf of the agency but in my own capacity as a member of the board.
One point I frequently emphasize when speaking to financial industry audiences is that, as a regulator, my goal is to create a regulatory system that is effective without being excessive. Moreover, wherever possible, I like to think in terms of giving regulated entities — in my case, credit unions under federal oversight — the flexibility they need to experiment and innovate in the ways that allow them to best serve their member-owners.
That’s particularly important with credit unions because it’s such a large and diverse industry. The universe of federally insured credit unions that the NCUA oversees numbers 4,583 institutions, representing 132.6 million members and holding $2.14 trillion in assets. But within the industry, we see tremendous diversity in terms of size and scope. The largest federal credit union is the Navy Federal Credit Union, which boasts nearly 12 million members and 365 branches, 26 of those overseas. At the same time, the NCUA oversees much smaller credit unions with only a few thousand members and a handful of branches.
As a regulator, I always keep the sheer breadth of that spectrum in mind because smaller credit unions are going to have different needs and capabilities than the largest institutions.
In fact, earlier this year, we had an issue that arose when the NCUA was preparing our new strategic plan, which included some language about climate risk. And it happened that some of the smaller agricultural credit unions took issue with that language because they were concerned about how it would affect their members, operations, and access to affordable capital.
Ultimately, we ended up removing that language, and I think everyone was satisfied. But for me, it was certainly a reminder of the need to step carefully on these issues and to think of the unforeseen effects and unintended consequences that our decisions might have. The comments gave a lot of useful feedback, and they were a reminder that when we’re talking about sustainability, we have to consider the impact on smaller institutions.
When people ask, what is the NCUA doing to craft rules that will support a commitment to sustainability? My response is that I don’t seek to impose a one-size-fits-all solution. I want credit unions of different sizes and risk profiles to be able to choose the approach that works best for their members, communities, and business models.
At the NCUA, however, we encourage credit unions to focus on sustainability issues, and one way we do that is by modeling that commitment in our own agency. Let’s take, for example, diversity, equity, and inclusion (DEI) initiatives. When I was serving as Chairman of the NCUA Board from 2019 to 2021, DEI was a top priority for me. In fact, one of my proudest achievements was the launch of the first NCUA DEI Summit in 2020, which I’m pleased to say has become an annual event. We just hosted our third DEI summit two weeks ago. During this year’s event, I hosted a panel discussion with senior leaders from Mckinsey and Korn Ferry that provided data and best practices about the profound benefits of equity and equality.
In 2020, we also launched the Advancing Communities through Credit, Education, Stability, and Support, or ACCESS, Initiative, which provides credit unions with tools and support to enhance outreach and service to unbanked and underbanked communities. We also provide an audit tool that credit unions can use to self-assess their own DEI performance, which they can use to see where they might need to improve. We also strive to have diversity in our leadership, new hires, and vendors. Our spend with diverse and minority suppliers exceeds 38 percent --one of the highest ratios among the federal financial institutions regulators.
One thing I’ll note about all our sustainability initiatives is that they’re voluntary. I’m happy to see credit unions commit to DEI priorities, but I’m not looking to dictate to them how they do that. I like the same approach when it comes to environmental, social, and governance (ESG) priorities, which is another area we’re seeing a lot of creativity and innovative thinking in the credit union lending space.
For example, we see even some smaller credit unions experimenting with loan programs to help their members to install solar panels and energy efficiency upgrades in their homes and businesses. We have minority depository credit union institutions that are exploring innovative lending models to get needed credit to small business entrepreneurs as part of their financial inclusion agenda. We have credit unions that are embracing clean energy investments or looking for ways to decarbonize their investment portfolios.
These are all promising experiments, and I’m delighted to see credit unions examining the ESG priorities and ferreting out opportunities on how best to make them work for their members and communities. But I will also emphasize that when we talk about ESG investing, we’re talking about an area that’s still relatively new and untested.
While I certainly see it as a promising area, I also believe allowing the industry to move at its own speed will allow for a more considered and constructive approach. So, I encourage credit union leaders to pay close attention to what others are doing, see what’s working, and determine if there’s a way to incorporate these strategies into their business plans.
I encourage you all to use the vast array of sustainability informational tools that are available. Ongoing education at events such as this is essential in this ever-evolving space. Resources include the United in Sustainability Network, the Inclusiv Center for Resilience and Clean Energy, the UN Global Compact, the Filene Research Institutes Center for Community Social Impact, the Sustainable Accounting Standards Board, and the United Nations Principles for Responsible Banking, just to name a few.
For example, I mentioned that I was a CRA Officer for a bank where I oversaw compliance with the Community Reinvestment Act, the regulation that ensures banks lend, volunteer, and invest in low-to-moderate-income communities. They received a grade based on their performance. Penalties include the inability to merge, install new ATMs or open branches. Credit unions don’t need regulation or government fiat to do the right thing — they do it to serve their members.
I think this approach can work for credit unions. I’m not suggesting here that regulators should be passive on these issues — that’s not the case at all. But the strength of the cooperative finance model has always been that it’s a bottom-up model, and I believe that when it comes to sustainability, the most effective and enduring ideas and solutions are likely to come from the grassroots, not from the top down. That does mean that progress will be slightly more incremental, but as they say, “Slow progress is still progress.” And I’ll add that slow progress often leads to more enduring change and lasting results.
That progress, that enduring change, those lasting results, is going to come from a lot of the people in this room and the vision and commitment that you bring to the table to achieve these goals. I look forward to working with you in partnership to bring those goals to fruition.
Thank you once again for having me.