Ceres calls on federal banking regulators to strengthen racial and climate equity in the Community Reinvestment Act

Ceres submitted comments recently to the Federal Reserve Board of Governors (Fed), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) urging the three agencies to modernize the Community Reinvestment Act (CRA) by explicitly incorporating racial equity and strengthening crucial environmental and climate provisions. 

Enacted in 1977 as part of a series of civil rights laws designed to expand access to credit and address discriminatory lending practices, the CRA requires federal banking regulators to encourage banks and other financial institutions to help meet the credit needs of the communities in which these institutions do business, with a focus on low- and moderate-income (LMI) neighborhoods. Ceres’ submission is in response to requests for comments on the interagency notice of proposed rulemaking (NPR) on updating the CRA

This NPR represents the most significant changes to the CRA regulations in over 20 years, and stands to increase lending, investment, and services in traditionally underserved communities, including LMI communities and communities of color. 

“Climate change exacerbates racial and economic inequality and frustrates the purpose of the CRA to end the nation’s long and painful history of lending discrimination against and the resulting disinvestment in communities of color and other financially vulnerable communities,” Ceres wrote in its comments. “We urge the agencies to strengthen the NPR by explicitly prioritizing racial equity and strengthening the crucial environmental and climate provisions.”   

As part of the 2022 Climate Risk Scorecard: Assessing U.S. Financial Regulator Action on Climate Financial Risk and consistent with recommendations from the 2021 FSOC Report on Climate-Related Financial Risk, Ceres examined the Fed, FDIC and OCC’s work assessing climate risks to “financially vulnerable communities.” The release of the current NPR was a major factor in our crediting these agencies’ for making progress in this area. 

Ceres recommends the CRA final rule contains the following provisions: 

  • Explicitly including the race of the borrower and community as a metric in order to ensure that historically redlined communities, and those most vulnerable to climate change, have improved access to credit and services.  
  • Having banks leverage available data tools to understand where climate vulnerable communities are found within assessment areas and work towards driving investment to those communities.  
  • A revised definition of community development activities to more effectively target activities to communities in need. Ceres supports the NPR’s addition of the disaster preparedness and climate resiliency definition under community development (CD) activities and an expanded, though non-exhaustive, list of eligible climate-related activities.  
  • Measuring the impact of community development activities as well as establishing benchmarks and metrics to assess the strength of community development financing. 
  • Encouraging banks to increase community engagement and relationship-building with climate and environmental justice organizations, including using community benefit agreements. 
  • Avoiding adverse impacts to LMI communities from community development activities receiving CRA credit. Any activities that contribute to demonstrable adverse impacts or disproportionate consequences, such as displacement, predatory lending, and increased environmental hazards, should not receive credit, and should result in ratings downgrades.  
  • Ensuring changes to assessment areas sufficiently capture online lending and deposit activity, particularly in smaller metropolitan areas and rural counties. 
  • No changes to the asset threshold for small and intermediate small banks. This would significantly decrease CRA responsibility for 20% of all banks, reducing community development financing and branching in LMI communities 

“Lower income communities are often the first to bear the brunt of the adverse effects of our rapidly warming planet,” said Ceres CEO and President Mindy Lubber. “True sustainability leadership means supporting a transition that not only protects our financial markets but builds a just and inclusive economy that provides equity to all. Updating the federal Community Reinvestment Act to prioritize issues of racial equity would help allow for all communities to mitigate the worst impacts of this crisis.” 

Ceres has previously advocated for the inclusion of climate resiliency and racial justice in the CRA. In February 2021, we provided eight suggestions to strengthen the CRA through explicit consideration of race and climate resilience in response to the Fed’s request for comment on the advance notice of proposed rulemaking to modernize its CRA rules. In October 2021, we strongly supported the OCC’s proposal to replace its 2020 CRA rules. We urged publication of interagency regulations that respond to climate challenges rooted in systemic racial inequalities, including climate vulnerability and environmental justice, that are primarily confronted by LMI communities of color.  

As a member of the National Community Reinvestment Coalition (NCRC), Ceres has also signed on to NCRC-led public comments related to CRA and submitted alongside many other partner organizations. 

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