29 April 2022
A more consistent global approach to addressing climate-related risks will help to better assess and mitigate financial vulnerabilities and to reduce the risk of harmful market fragmentation.
This report aims to assist supervisory and regulatory authorities in developing their approaches to monitor, manage and mitigate risks arising from climate change and to promote consistent approaches across sectors and jurisdictions.
Climate-related risks, including physical, transition and liability risks, may be transmitted across the financial system and may be amplified by the financial system, including across borders and across sectors. A more consistent global approach to addressing climate-related risks will help both to better assess and mitigate financial vulnerabilities and to reduce the risk of harmful market fragmentation. By focusing on cross-sectoral and system-wide aspects of climate-related financial risks, this report complements the standard-setting bodies’ ongoing work on approaches to addressing climate-related financial risks for their respective sectors in the development of supervisory and regulatory approaches to climate-related risks. In addition, as climate change is likely to represent a systemic risk for the financial sector, potential macroprudential tools or approaches would complement microprudential instruments.
The report
Examines supervisory and regulatory reporting and collection of climate-related data from financial institutions. (The lack of sufficiently consistent, comparable, granular and reliable climate data reported by financial institutions is a main challenge for authorities.)
Explores system-wide supervisory and regulatory approaches to assessing climate-related risks, including the use of analytical tools such as climate scenario analysis and stress testing
Assesses the extent to which current policies and tools address climate-related risks and gives early consideration to other potential macroprudential policies and tools
These three areas taken together inform how the use of climate scenario analysis and stress tests can be expanded to incorporate systemic risks that arise from climate change and to better inform a macroprudential perspective of risks across financial sectors and jurisdictions.
The FSB invites stakeholder views on the recommendations it has made in this report. Responses should be sent to fsb@fsb.org by 30 June 2022 with the title “Supervisory and Regulatory Approaches to Climate-related Risks”. Responses will be published on the FSB’s website unless respondents expressly request otherwise.
p/o Virginie Gastine Menou
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