Basel Committee Releases Survey Regarding Climate Related Financial Risk Initiatives

The Basel Committee published their, “Climate-related financial risks: a survey on current initiatives”, summarizing members’ existing regulatory and supervisory initiatives on climate-related financial risk. The Basel Committee created the Task Force on Climate-related Financial Risks (TFCR) to improve global financial stability by performing “a stocktake of members’ existing regulatory and supervisory initiatives on climate-related financial risks;” initiating “a set of analytical reports on climate-related financial risks, including a literature review, and reports on the transmission channels of such risks to the banking system as well as on measurement methodologies”; and developing “effective supervisory practices in order to mitigate climate-related financial risks”.

The survey suggests that:

  • The majority of Basel Committee members consider it appropriate to address climate-related financial risks within their existing regulatory and supervisory frameworks;
  • an overwhelmingly large share of members have conducted research related to the measurement of climate-related financial risks, while a number of members identified operational challenges in assessing climate-related financial risks such as data availability, methodological challenges, and difficulties in mapping of transmission channels. A majority of the members have raised risk awareness with banks through different channels, and many banks are disclosing information related to climate-related financial risks to some extent; and
  • approximately two-fifths of members have issued, or are in process of issuing, more principles based guidance regarding climate-related financial risks. However, the majority of members have not factored, or have not yet considered factoring, the mitigation of such risks into the prudential capital framework.