Global Climate-Risk Disclosures and Standards

The FSB’s report is aimed at establishing global standards that prevent fragmentation along national or regional lines as well as ensuring that regulatory and supervisory actions mitigate climate risk to the greatest extent possible in the face of an array of data and measurement challenges. Although the FSB proposes no specific requirements, its draft recommendations suggest that it will soon press global and national bank, securities, and insurance regulators to adopt macroprudential tools such as scenario analysis and stress testing to capture systemic interconnections primarily of concern at the largest financial institutions. The report also lays out issues for continued analysis to promote climate-risk policies going beyond credit and market risk to gain a better understanding of the interplay between physical, transition, and liability climate risk.