20 December 2024

Summary of CPMI-IOSCO workshops on climate risks for financial market infrastructures

The Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) hosted two virtual workshops on climate risks on 26 March and 16 April 2024. The objectives of these workshops were (i) to share a general overview of climate risks and how they may differ for various types of financial market infrastructures (FMI); (ii) to explore what actions FMIs and authorities are taking to address climate risks; (iii) to discuss how the CPMI-IOSCO Principles for Financial Market Infrastructures (PFMI) can be used to identify, monitor and manage climate risks; and (iv) to identify challenges and areas for further work.

The workshops were attended by over 300 participants from different types of FMIs, such as payment systems, central securities depositories/securities settlement systems, central counterparties (CCPs) and trade repositories, as well as relevant trade associations, central banks and securities commissions. The programme included keynote remarks from Inge van Dijk (De Nederlandsche Bank), Frank Elderson (European Central Bank) and Fundi Tshazibana (South African Reserve Bank and the Network for Greening the Financial System (NGFS)) as well as panel discussions with leading experts in the area.1 This summary provides an overview of the practices and issues discussed by the workshops’ participants and therefore does not necessarily reflect the views of individual speakers or that of the CPMI-IOSCO or the industry as a whole.

risks, not least because FMIs form the backbone of the financial system. Noting that the PFMI provide good high-level guidance for sound risk management, she described how De Nederlandsche Bank used the PFMI as a foundation when it developed good practices for the management of climate risks by FMIs.
Ms Tshazibana underlined the important role that FMIs play in the financial system and called for a holistic, system-wide approach to climate risks. She also described the PFMI as a solid basis for managing climate risks for FMIs. Ms Tshazibana highlighted five areas of attention to adequately assess climate risks’ impacts and associated solutions: (i) the need to improve analytical capacity, (ii) the need to understand FMIs’ interdependencies with other (non-financial) infrastructures, (iii) the need for global solutions, (iv) the interaction of climate risks with other risks, and (v) the potential role of fintech and financial innovation in increasing resilience.

Mr Elderson argued that there are transferable lessons to be learned from how other parts of the financial system have dealt with climate risks, underlining that the same applies to risks stemming from nature degradation. He noted that climate risks have been identified as drivers of more traditional risk categories, such as credit risk, liquidity risk and market risk, and stressed the need for sound materiality assessments. Mr Elderson also underlined the need for central banks and supervisors to stay within their mandate when dealing with this theme, noting that ignoring climate risks would not be consistent with sound risk management, supervision and oversight. As a way forward, he offered several options for consideration, such as industry guidance on good risk management practices, increased transparency through disclosure frameworks, and climate stress testing....

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