Interconnected climate-related financial risks demand coordinated action, warns FSB, ahead of G20 Venice Summit.
The Financial Stability Board (FSB) is calling on leading economies to coordinate action designed to address financial risks posed by climate change.
In a letter to G20 Finance Ministers and Central Bank Governors, ahead of their Venice summit this weekend, the FSB points to a “large, and growing, number of international initiatives” that are already underway to address climate-related financial risks.
“This reflects the increasing attention paid to the topic as well as the global and cross-sectoral nature of climate-related financial risks,” the letter says. “The interconnected nature of climate-related financial risks and the growing body of work to address them reinforce the need for coordinated action.”
With this in mind, the FSB has published a comprehensive roadmap for addressing climate-related financial risks, for which it is seeking the G20’s endorsement.
The roadmap outlines the work underway and still to be done by standard-setting bodies and other international organisations over a multi-year period in four key policy areas: disclosures, data, vulnerabilities analysis, and regulatory and supervisory approaches.
The time horizon of the roadmap focuses on actions in the short and medium term (2021-2023), while also indicating the direction and goals of work beyond that time period and allowing for flexibility as priorities evolve over time.
A separate report has been published examining the availability of data for monitoring climate-related financial stability risks, the remaining data gaps, and work underway to address these gaps.
Specifically, the FSB calls attention to the IFRS Foundation’s programme of work to develop a baseline global sustainability reporting standard under robust governance and public oversight.
The FSB says financial authorities should:
- consider how to improve the quality and consistency of data on FIs’ exposures to climate-related risks arising from exposures to nonfinancial counterparties and their supply chains
- consider developing forward-looking metrics on climate-related risks, both at the level of individual firms and the financial system as a whole
- work together to widen and harmonise data on the degree to which individual FIs’ exposures to climate-related risks are mitigated by insurance provisions
The FSB proposes to provide a forum to bring financial authorities together to compare their experiences on the implementation of scenario analysis designed to assess financial system resilience to climate-related risks.
A third report outlines efforts to promote climate-related disclosures that are globally consistent and comparable. One primary difference in approaches is whether national regimes are ‘mandatory’ or ‘voluntary’ in their implementation.
The report includes case studies of the approaches used in the UK, Japan, EU, Hong Kong and Brazil, and sets out high-level guidance to support authorities in their development of frameworks.