The Basel Committee on Banking Supervision today released outlined principles for the effective management and supervision of climate-related financial risks. The committee said it is taking a “holistic approach” to addressing climate-related financial risks to the global banking system, including the consideration of disclosure, supervisory and regulatory measures.
The document includes 18 high-level principles—12 of which provide banks with guidance, while the rest provide guidance for prudential supervisors. Among other things, the bank-related principles address corporate governance, internal controls, capital and liquidity adequacy, risk management processes, monitoring and reporting and scenario analysis.
Banks should manage climate-related financial risks in a manner that is “proportionate to the nature, scale and complexity of their activities” and the overall level of risk that each bank is willing to accept, the document states. “The proposed principles seek to achieve a balance in improving practices related to the management of climate-related financial risks and providing a common baseline for internationally active banks and supervisors, while maintaining sufficient flexibility given the degree of heterogeneity and evolving practices in this area,” the committee added.
Comments on the principles will be due Feb. 16. The American Bankers Association is currently reviewing the document and will seek input from its Climate Task Force in crafting its comments.