Climate reporting remains unfinished business: FSB

Voluntary reporting on climate-related risks has improved, but mandatory standards remain a work in progress, according to the Financial Stability Board (FSB).

The global policy group published a pair of reports today — a progress report on the state of climate-related financial disclosure, and a guidance for financial regulators on dealing with climate risks.

Among other things, the group found that an increasing number of companies are providing reporting that aligns with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

And, more than half of the countries that belong to the FSB are preparing to adopt the final standards that are being developed by the International Sustainability Standards Board (ISSB).

“The timely issuance of a final global baseline climate reporting standard ready for adoption across jurisdictions is critical to provide decision-useful information to investors and other stakeholders on climate-related risks and opportunities,” it said.

However, policymakers also anticipate a variety of challenges with implementing an ISSB climate standard, “such as consistency and comparability of disclosures across jurisdictions and across firms, data availability, proportionality, transition arrangements, and materiality.”

Moreover, while voluntary disclosure has increased, it remains inadequate, “which may hinder investors, lenders, and insurance underwriters’ efforts to appropriately assess and price climate-related risks,” the report said.

At the same time, the FSB also issued guidance that aims to help regulators develop approaches to deal with the risks posed by climate change, including systemic risks.

Among other things, that guidance covers: collecting climate-related data from financial firms; utilizing scenario analysis and stress tests to address climate risks; and, deploying macroprudential tools and policies, such as firms’ capital requirements, to address climate risks.

“The report provides high-level recommendations to promote consistency as authorities continue to develop their approaches to monitor, manage and mitigate risks arising from climate change,” the FSB said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.