Climate-related financial risks: a survey on current initiatives

Following the adoption of the 2015 Paris Agreement on climate change and the United Nations (UN) 2030 Agenda for Sustainable Development, the attention given to the potential risks related to climate change, as well as its economic and financial impacts, has been growing globally. In February 2020, the Basel Committee on Banking Supervision (BCBS) established the Task Force on Climate-related Financial Risks (TFCR), whose mission is to maintain the global financial system´s stability and security in face of climate risks. The TFCR has set out its intention of carrying out research about these risks, the transmission channels of such risks to the banking system and measurement methodologies, as well as developing effective supervisory practices in order to mitigate climate-related financial risks.

 

Climate-related financial risks (BCBS)

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In this context, the Basel Committee on Banking Supervision (BCBS) has published the “Report about climate-related financial risks: survey on current initiatives”, which summarises the main results of the stocktake of member´s initiatives on climate-related financial risks. The survey received answers from a total of 27 members and observers, and it covers topics such as the role of financial climate risks in the supervisory and regulatory framework, measures to improve the attention given to these risks by stakeholders and research carried out regarding measurement. This survey also covers climate risk management and disclosure strategies and the supervisory treatment given to these risks by Committee members.

This Technical Note summarises the main aspects included in the “Report about climate-related financial risks: survey on current initiatives”, published by the BCBS.

Executive summary

The “Report about climate-related financial risk: survey on current initiatives” published by the BCBS summarises the main results of the stocktake of member´s initiatives on climate-related financial risks.

Main content

The main results of the survey carried out in order to publish this report are the following:

• The majority of Basel Committee members consider appropriate to act within their existing regulatory and supervisory mandates to mitigate climate-related financial risks.
• A large majority of respondents have already conducted research related to the measurement of financial risks related to climate change. However, they have also identified several operational challenges in order to assess these risks, such as:
  • Data availability.
  • Methodological challenges.
  • Difficulties in mapping transmission channels between climate change risks and financial risks that threaten financial stability.
• The majority of members have already started raising awareness of climate-related financial risks among stakeholders.
• Many banks are already disclosing information regarding climate risks to varying degrees.
• Approximately 2/5 of respondents have already issued, or are in the process of issuing, dedicated supervisory guidance related to the governance, strategy and management of climate risks.
• Nevertheless, most members have not yet factored the mitigation of climate-related financial risks into their prudential capital framework.

Access the full document in Spanish.