Building on its 2017 climate-change disclosure work, the FSB today issued what it describes as a “stocktake” – i.e., a survey combined with next steps – in this increasingly critical area. The FSB remains focused only on its broad financial-stability mandate in its climate-change work, but this report for the first time also addresses supervisory considerations. As detailed, the survey shows that about three-quarters of respondent supervisory agencies believe climate change is an important financial-stability consideration, with most focusing on asset prices and credit quality in the banking and insurance sectors. A detailed discussion of stress-testing and related methodologies analyzes an array of challenges suggesting, but not expressly concluding, that many analytical challenges remain before climate-change testing would prove practicable. One may also infer from these discussions that establishing capital charges for “brown risk” as the BIS recently proposed (see Client Report GREEN) also faces significant analytical challenges. The FSB paper mentions individual nations only to the extent necessary to describe relevant initiatives and research.
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