13 October 2022

SB publishes recommendations for supervisory and regulatory approaches to climate-related risks and calls for continued progress on disclosu

The Financial Stability Board (FSB) today published two reports as part of its work on addressing climate-related financial risks, outlined in its Roadmap.

• A final report on supervisory and regulatory approaches to climate-related risks. The report aims to assist supervisory and regulatory authorities in developing their approaches to monitor, manage and mitigate cross-sectoral and system-wide risks arising from climate change and to promote consistent approaches across sectors and jurisdictions.

• A progress report on climate-related disclosures, which takes stock of progress made over the past year by the new global standard-setter, by national and regional authorities and by firms.

The FSB also welcomes the publication today of the 2022 status report by its industry-led Task Force on Climate-related Financial Disclosures (TCFD), which describes the further progress by firms in making TCFD-aligned disclosures.

Supervisory and regulatory approaches to climate-related risks

The report provides high-level recommendations to promote consistency as authorities continue to develop their approaches to monitor, manage and mitigate risks arising from climate change. The report has been finalised following a public consultation on the interim report in April 2022. The recommendations cover:

• Supervisory and regulatory reporting and collection of climate-related data from financial institutions: The recommendations encourage authorities to accelerate the identification of their data needs for supervisory and regulatory objectives; identify relevant types of data and metrics that they may require from financial institutions; and provide key policy considerations to assist authorities in their future work towards expanding regular standardised regulatory reporting requirements.

• System-wide supervisory and regulatory approaches and the extent to which supervisory and regulatory tools and policies address climate-related risk: Authorities are encouraged to expand the use of climate scenario analysis and stress tests for macroprudential purposes. As approaches develop and mature in the next few years, the FSB will consider in 2024 conducting a peer review of supervisory and regulatory practices against its recommendations. The FSB will also consider updating its recommendations in 2025.

• Early consideration of other potential macroprudential policies and tools:  The report notes that microprudential tools alone may not sufficiently address the cross-sectoral, global and systemic dimensions of climate-related risks. Authorities and standard-setting bodies are encouraged to undertake research and analysis in the near to medium term on the appropriate enhancements to their regulatory and supervisory frameworks...

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