FSB updates roadmap for addressing climate-related financial risks

In July 2021, FSB published a comprehensive roadmap to address climate-related financial risks. It has now delivered a progress report on the roadmap as required by the G20.

Physical risks and a disorderly transition to a low-carbon economy could have destabilising effects on the financial system, such as a rise in risk premia and falling asset prices. The report notes that steady progress has been made across all four focus areas:

Firm-level disclosures

FSB acknowledges the publication of ISSB’s financial standards on general sustainability-related disclosures and on climate-related disclosures as a substantial achievement. The standards will serve as a global framework and enable disclosures by different companies globally on a common basis.

A key priority is now the consideration of the International Organization of Securities Commissions (IOSCO) of endorsement of the standards for authorities to adopt, apply or otherwise utilise in a robust and timely manner. FSB has asked IOSCO to take over from the Task Force on Climate-related Financial Disclosures the monitoring of their adoption by firms. Next steps include promoting interoperability, in order to avoid double reporting, and the development of a global assurance framework to drive reliability.

Data

Work continues on improving availability, quality and cross-border comparability of climate data. An important goal is to develop global repositories that provide open access and facilitate use of metrics reflecting climate-related risks consistently. Further work is planned to develop metrics in a forward-looking manner.

Vulnerabilities analysis

FSB identifies further work to embed climate scenarios in the monitoring o financial vulnerabilities and to develop understanding of the cross-border and cross-sectorial transmission of climate shocks.

Regulatory and supervisory practices and tools

Initiatives on embedding climate-related risk into risk management and prudential frameworks are ongoing and capacity building remains a key focus. FSB notes the growing interest in the role of transition plans as a source of information for financial authorities to assess prudential risks.

FSB is setting up a workgroup that will develop a conceptual understanding on the relevance of transition planning for financial stability. As many initiatives have already started or been considered, FSB notes that it must ensure close coordination with SSBs and other relevant bodies.