Industry

Encouraging Progress on Climate Risk Roadmap: FSB

FSB highlights areas for further attention in annual stocktake on progress to address climate-related financial risks.

The Financial Stability Board has published its first annual progress report on its roadmap for addressing climate-related financial risks.

The FSB published the roadmap in July 2021, setting out a comprehensive and coordinated plan for addressing climate-related financial risks, including steps and indicative timeframes.

The progress report takes stock of progress by standard-setting bodies and other international organisations on the actions coordinated through the roadmap, outlines areas for further attention, and provides updates where needed to the detailed roadmap actions.

The report says encouraging progress has been made across all four blocks of the roadmap:

On firm-level disclosures, the FSB says a milestone has been the publication of the two exposure drafts, on climate and general sustainability-related disclosure standards, by the International Sustainability Standards Board.

“The timely issuance of a final global baseline climate reporting standard ready for market adoption is critical given the global market demand for consistent, comparable, and decision-useful disclosures on climate-related risks and opportunities,” the FSB says. “Moreover, there is also a growing recognition of the importance of global assurance standards to drive reliability of disclosures.”

On data, the FSB says work has continued on improving the availability and cross-border comparability of climate-related data more broadly.

The current priorities are to further coordinate the establishment of common metrics for financial risks, including forward-looking metrics, and to establish data repositories that provide open access to data in a consistent form.

On vulnerabilities analysis, the FSB says work has continued to progress along three strands – ongoing monitoring using the tools currently available, development of conceptual frameworks, and further development of scenario analysis.

It adds that further work is needed to embed climate scenarios into monitoring of financial risks, to appropriately account for longer time horizons and uncertain outcomes that climate-related risks may involve.

On regulatory and supervisory practices and tools, the FSB says a number of initiatives have been completed or are well underway across the standard-setting bodies and relevant international bodies, including supervisory risk management expectations and supervisory guidance covering the banking, insurance and asset management sectors.

Financial authorities should continue to embed the supervision of climate-related risks into overall supervisory frameworks, including the further development of the use of climate scenario analysis and stress testing exercises, the FSB says.

The progress report is being delivered to G20 finance ministers and central bank governors meeting in Indonesia this week.

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