On 29 April 2022, the Financial Stability Board (FSB) issued a report setting out certain recommendations that are intended to assist supervisory authorities in developing their approaches to monitor, manage and mitigate cross-sectoral and system-wide risks arising from climate change and promote consistent approaches across sectors and jurisdictions.
The report:
- Examines supervisory and regulatory reporting and collection of climate-related data from financial institutions.
- Explores system-wide supervisory and regulatory approaches to assessing climate-related risks, including the use of analytical tools such as climate scenario analysis and stress testing.
- Assesses the extent to which current policies and tools address climate-related risks and considers other potential macro-prudential policies and tools.
The recommendations in the final report focus on the following areas:
- Supervisory and regulatory reporting and collection of climate-related data from financial institutions. The report includes recommendations on the identification of authorities’ information needs, reliability of data, use of common definitions and coordination towards common regulatory reporting requirements.
- System-wide supervisory and regulatory approaches to assessing climate-related risks. The report includes recommendations on how authorities’ approaches should account for the potential widespread impact of climate-related risks across the financial system, including with respect to use of scenario analysis and stress testing exercises.
- Early consideration of other potential macro-prudential policies and tools to address systemic risks. Micro-prudential tools alone may not sufficiently address the cross-sectoral, global and systemic dimensions of climate-related risks. The report presents some of the early thinking on macro-prudential policies and tools that could complement micro-prudential measures, and trade-off considerations.
The FSB is inviting comments on its recommendations by 30 June 2022.
