New York state’s financial regulator is urging firms to pay closer attention to financial risks associated with climate change.

In a letter sent to all regulated entities on Thursday, the New York Department of Financial Services (NYDFS) said that it expects firms, including virtual currency businesses, to start assessing such risks and develop possible approaches to mitigate them. The letter follows similar guidelines issued by the NYDFS for the state’s insurance providers in September. 

Noting that each rise of one degree celsius in global temperatures leads to damages worth 1.2% of the U.S. gross domestic product (GDP), the letter said reduced economic output in communities hit harder by climate change could also lead to an increase in default rates, reduced lending activity, devalued assets, and losses. It added that flood risk could impact regional and community banks in particular. 

Addressing virtual currency businesses, the letter stated that studies suggest the environmental impact of mining cryptocurrencies like bitcoin can be substantial. “The energy cost for mining virtual currencies is sizable compared to the value of the virtual currencies,” said the letter. 

While the letter acknowledged that the exact energy consumption of bitcoin mining also depends on the geography, it added that “virtual currency firms should consider increasing transparency of the location and equipment used in bitcoin mining,” in order to add clarity about the environmental impact.  

A similar concern regarding the environmental impact of crypto mining was also raised by Heath Tarbert, chairman of the Commodity Futures Trading Commission (CFTC), during an interview at Coindesk’s invest:ethereum economy event. “There are issues with mining, of course, so number one [is] environmental issues,” he said, speaking about ethereum’s move to a proof-of-stake system and how that could help make ethereum more environmentally friendly. 

Read More: The Last Word on Bitcoin’s Energy Consumption

While there are pressing concerns about bitcoin’s energy consumption, it is also important to note that the environmental impact also depends on how that energy was produced. For example, China’s Sichuan region is a bitcoin mining hub but is also plush with supply of hydroelectric power. 

According to the letter, the NYDFS expects all regulated virtual currency businesses to conduct an assessment of climate change associated risks which could impact them directly or indirectly. 

The letter  said that the organizations like banks, mortgage servicers, etc., should also designate a board member, a committee of the board, as well as a senior management function, responsible for the assessment and management of financial risks from climate change. 

Adding that the NYDFS understands that climate change is likely to affect organizations differently, the regulator’s letter said that each organization should take a “proportionate approach” that reflects its exposure to climate change associated financial risks. 

“DFS is developing a strategy for integrating climate-related risks into its supervisory mandate,” the letter said, indicating that mitigating climate change associated risks is likely to stay on the regulator’s radar going forward.