UNEP FI responds to Basel Committee on Banking Supervision consultation on its principles for management and supervision of climate-related
22 February 2022
We believe that strong regulatory action can help catalyse the financial sector to address the risks posed by climate change and the net-zero transition.
At UNEP Finance Initiative, we believe that the financial sector has a
central role to play in managing climate risk and ensuring an orderly
transition to a sustainable future, and with our members, we have
conducted extensive work on climate-related financial risks and
disclosures through our sustainable finance frameworks, net-zero
alliances, and TCFD pilot programmes. Therefore
UNEP FI strongly welcomes the publication of the
Basel Committee on Banking Supervision (BSBC)’s Principles for the
effective management and supervision of climate-related financial risks. We have responded to the consultation and you can find a summary, as well as a link to the full response below.
The document provides actionable guidance to both financial
institutions and financial supervisors and we particularly welcome the
following:
- Continued acknowledgement that climate risks are financial risks and
that additional guidance is required within the financial sector for
their management
- Recognition that climate change poses capital, liquidity, credit, market, operational, and other risks
- Principles for supervisors on how to evaluate firms’ climate risk management practices
- A complete set of operational areas to consider in managing climate
risks: corporate governance, internal control framework, capital and
liquidity policy, risk management process, management monitoring and
reporting, comprehensive management of credit risk, comprehensive
management of market, liquidity, operational, and other risks, and
scenario analysis
- Guidance to consider various time horizons and different scenarios
in assessing the preparedness of an institution to face climate-related
financial risks
- Guidance on the monitoring and reporting of climate-related financial risks by financial institutions
- Consideration of the potential application of these principles to other environmental and nature-related risks
We also offered a few recommendations for further enhancement of the Principles:
- Aligning the Principles with international standards around disclosure standards and good practices for climate risk management.
- Encouraging strong regulatory action to enhance the
financial sector’s preparedness to confront climate-related risk and
improve the quality of climate-related financial disclosure.
- Using credible net-zero by 2050 scenarios aligned with the 1.5°C temperature rise objective.
- Giving prescriptive guidance on important metrics to disclosure and credible scenarios to use.
- Broadening the Principles to related areas of environmental risk such as biodiversity loss, deforestation, pollution, water and human rights issues that can also pose financial risks.
A copy of our response including detailed comments on the Principles can be downloaded here.
UNEP FI
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