On 15 June 2022, the Basel Committee on Banking Supervision (Basel Committee) issued principles for the effective management and supervision of climate-related financial risks.

The 18 principles are intended to promote a principles-based approach to improving both banks’ risk management and supervisors’ practices related to climate-related financial risks. They cover corporate governance, internal controls, risk assessment, management and reporting. The principles seek to accommodate a diverse range of banking systems and are intended to be applied on a proportionate basis depending on the size, complexity and risk profile of the bank or banking sector for which the authority is responsible. Specifically, with regard to scenario analysis and stress testing, the principles are formulated with a view towards application to large internationally active banks and to supervisory and other relevant financial authorities in Basel Committee member jurisdictions. However, smaller banks and authorities in all jurisdictions can benefit from a structured consideration of the potential impact of climate-related financial risks.

The Basel Committee expects implementation of the principles as soon as possible and will monitor progress across member jurisdictions to promote a common understanding of supervisory expectations and support the development and harmonisation of strong practices across jurisdictions.