G20 Finance Ministers and Central Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take account of climate-related issues. To this end, the Financial Stability Board of the G20 established an industry-led task force: the Task Force on Climate-related Financial Disclosures (Task Force) to develop voluntary, consistent climate-related financial disclosures that would be useful to investors, lenders, and insurance underwriters in understanding material risks.

The Task Force developed four widely-adoptable recommendations on climate related financial disclosures that are applicable to organizations across sectors and jurisdictions. The recommendations are structured around four thematic areas that represent core elements of how organizations operate:

  • Governance
  • Strategy
  • Risk management
  • Metrics and targets

In the Annex of the report, the Task Force developed supplemental guidance for financial and non-financial organizations to assist those organizations in implementing the recommended disclosures.

Supplemental Guidance for Banks include that:

  • “Banks should describe significant concentrations of credit exposure to carbon-related assets.14 Additionally, banks should consider disclosing their climate-related risks (transition and physical) in their lending and other financial intermediary business activities”;
  • “Banks should consider characterizing their climate-related risks in the context of traditional banking industry risk categories such as credit risk, market risk, liquidity risk, and operational risk.
  • Banks should also consider describing any risk classification frameworks used (e.g., the Enhanced Disclosure Task Force’s framework for defining “Top and Emerging Risks”).”
  • “Banks should provide the metrics used to assess the impact of (transition and physical) climate-related risks on their lending and other financial intermediary business activities in the short, medium, and long term. Metrics provided may relate to credit exposure, equity and debt holdings, or trading positions, broken down by:
    ‒  Industry
    ‒  Geography
    ‒  Credit quality (e.g., investment grade or non-investment grade, internal rating system)
    ‒  Average tenor Banks should also provide the amount and percentage of carbon-related assets relative to total assets as well as the amount of lending and other financing connected with climate-related opportunities”

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This publication is related to the Principles 2 and 5 and the Work Streams 1 and 2 of the Climate Action in Financial Institutions Initiative: