On 22 November 2023, the Basel Committee on Banking Supervision (Basel Committee) published a newsletter on the implementation of the Principles for the effective management and supervision of climate-related financial risks (the Principles).

The Basel Committee published the Principles, which seek to improve banks’ climate-related financial risk management and supervisors’ practices, as part of its holistic approach to addressing climate-related financial risks to the global banking system. The Basel Committee expects implementation of the Principles as soon as possible and is monitoring progress across member jurisdictions to promote a common understanding of supervisory expectations and to support the development and harmonisation of strong practices across jurisdictions.

The newsletter highlights the following:

  • Following the publication of the Principles in June 2022, supervisory authorities and banks have made progress on implementing them, but further work is needed.
  • Full implementation will require ongoing effort and adequate resourcing by banks and supervisors to improve capabilities and expertise.
  • Data limitations were identified as the main impediment for banks and supervisors to implement the Principles.
  • While the methodologies and data used to analyse climate-related financial risks are still evolving, improving the availability and quality of data should be an ongoing area of focus. Where reliable or comparable climate-related data are not available, banks are encouraged to consider using reasonable proxies and assumptions as alternatives in their internal reporting as an intermediate step, acknowledging the limitations and sensitivities of risk outcomes.
  • The Basel Committee places a high priority on work related to climate-related financial risks and will continue to monitor progress to support implementation as soon as possible.

For further updates on regulatory developments in the ESG space please visit our Financial Services Regulatory Developments in ESG hub.