July paper will build on TCFD recommendations “to promote high-quality climate disclosures”.
The Financial Stability Board (FSB) will outline plans for more consistent reporting of climate risks by corporates in a report to Group of 20 (G20) finance ministers and central banks in July.
In his latest update to G20 members, Chair Randal Quarles said the board would report on “ways to promote consistent, high-quality climate disclosures”, based on the recommendations of the Task Force for Climate-related Financial Disclosures (TCFD).
The FSB, membership of which include central banks, financial regulators and treasury officials from G20 countries, established the TCFD in 2017 and its recommendations on climate risk reporting have been widely adopted by large global corporates and financial institutions. However, compliance is voluntary at present, meaning the level of detail supplied on climate risks is inconsistent.
Some countries, notably the UK, are in the process of introducing mandatory reporting requirements in line with TCFD recommendations, for corporates, financial institutions and asset owners. But even in such jurisdictions, the level of reporting remains mixed. According to the Financial Times, a recent report by FTI Consulting found that fewer than 50 UK-listed firms are currently “comprehensively” reporting climate risks and setting targets in line with TCFD recommendations.
The FSB will also present to the G20 a separate paper on the data needed to assess financial stability risks and related data gaps. Noting the increased momentum of initiatives focused on climate risk, Quarles said the FSB would “present a coordinated, forward-looking roadmap to address climate related financial risk”, leveraging work conducted by standard setting bodies and international organisations as well as the FSB’s own work streams.
The letter said the FSB welcomed efforts led by the IFRS Foundation to accelerate convergence in global sustainability reporting standards with an initial focus on climate, through the further development of a prototype derived from TCFD recommendations.
To support climate risk initiatives, the FSB has invited the Network for Greening the Financial System (NGFS), a coalition of central banks and financial market supervisors, to participate in its climate-related work.
Separately, the NGFS announced the launch of a joint study group on biodiversity and financial stability, in partnership with the International Network for Sustainable Financial Policy Insights, Research and Exchange (INSPIRE), an existing research stakeholder of the group.
The initiative aims to establish an evidence-based approach for how central banks and supervisory authorities can fulfil their mandates in the context of biodiversity loss, with a focus on land-use and deforestation.