Supervisory and Regulatory Approaches to Climate-related Risks: Final report
A more consistent global approach to addressing climate-related risks will help both to better assess and mitigate financial vulnerabilities and to reduce the risk of harmful market fragmentation.
This report has been developed as part of the FSB Roadmap for Addressing Climate-related Financial Risks published in 2021. It reflects public feedback received on a consultative version of the report, which the FSB published in April 2022.
By focusing on cross-sectoral and system-wide aspects of climate-related financial risks, this report complements the standard-setting bodies’ ongoing work on approaches to addressing climate-related financial risks for their respective sectors. In addition, as climate change is likely to represent a systemic risk for the financial sector, potential macroprudential tools or approaches would complement microprudential instruments.
In particular, the report focuses on three areas:
supervisory and regulatory reporting and collection of climate-related data from financial institutions as foundational elements in the identification and monitoring of climate-related risks;
system-wide supervisory and regulatory approaches to assessing climate-related risks, including the use of analytical tools such as climate scenario analysis and stress testing; and
assessing the extent to which current policies and tools address climate-related risks, and early consideration of other potential macroprudential policies and tools to address systemic risks that may not be addressed fully by current measures, based on the work of standard-setting bodies and authorities.
These three areas taken together inform how the use of climate scenario analysis and stress tests can be expanded to incorporate systemic risks that arise from climate change and to better inform a macroprudential perspective of risks across financial sectors and jurisdictions.
This report is intended to assist all authorities in assessing climate-related risk. However, the applicability of the high-level recommendations may differ depending on each authority’s mandate and the role that different tools (such as scenario analysis) may play in their different sectoral settings (e.g. the different role such tools may play for banks compared with asset managers).
The FSB will consider in 2024 whether and when to conduct a peer review of supervisory and regulatory practices against its recommendations across jurisdictions, as well as further consideration of the state of development of macroprudential tools. It will also consider in 2025 whether to make an update to the report’s recommendations.