According to a recent report from the Bank for International Settlements (BIS), many national regulators are actively engaging in initiatives aimed at addressing climate-related financial risks. However, most have yet to incorporate these risk mitigations into their prudential capital frameworks.
The Basel Committee on Banking Supervision has established a high-level Task Force on Climate-related Financial Risks (TFCR), which is assessing the various efforts undertaken by its 27 member institutions on this crucial issue. The majority of these members, comprising central banks and regulatory authorities, are implementing strategies to raise awareness of climate-related risks among banks and other stakeholders. Initiatives include requiring or encouraging banks to disclose information related to these risks, conducting stress tests, and fostering the development of sustainable finance.
Notably, around 40% of members are advancing further by issuing, or preparing to issue, guidance that emphasizes principles-based approaches to managing climate-related financial risks. However, a significant portion of these institutions has not yet integrated risk mitigation strategies into their prudential capital frameworks.
The TFCR is poised to produce a series of analytical reports that will explore the transmission pathways of climate-related financial risks to the banking sector and evaluate measurement methodologies.
For further in-depth insights, you can access the full report here.