As the annual summit of G20 finance ministers and central bank governors kicks off in Italy today, the Financial Stability Board released its roadmap for global regulatory coordination on climate-related financial risks. The FSB roadmap focuses on four main approaches: firm-level disclosures, data, analysis of vulnerabilities and regulatory and supervisory practices.
Regarding disclosures, in order to promote consistency, the FSB said it would use frameworks based on the work of the Task Force on Climate-Related Financial Disclosures and the in-development IFRS sustainability disclosure standards. Once those standards are issued and should the International Organization of Securities Commissions endorse them, local regulators would then adopt their own frameworks for using the international standards.
The FSB noted that the climate data available to financial institutions is not currently suitable for climate risk management and said it is taking further action in 2022 to fill data gaps and identify forward-looking metrics. These efforts will align closely with efforts to analyze vulnerabilities under different climate scenarios. “Addressing such data gaps will enhance the assessment and monitoring of climate-related risks to financial stability and enable market participants to incorporate climate-related financial risks more effectively in their decisions, including the pricing of credit and allocation of capital,” said FSB Chairman and Federal Reserve Vice Chairman for Supervision Randal Quarles.