BoE Governor Carney confirms FSB climate risks disclosure taskforce proposal for G20

Proposals first reported by RI last month to go before G20 meeting this weekend.

Bank of England Governor Mark Carney has today announced that the Financial Stability Board (FSB) will propose the creation of a disclosure taskforce on climate-related risks at the upcoming G20 summit this weekend. The taskforce, first revealed by Responsible Investor last month, will be industry-led and develop recommendations for voluntary and consistent climate-related disclosures that will be useful to lenders, insurers, investors and other stakeholders in understanding material risks. Carney said today that providing leaders of the Group of 20 large economies endorsed the plan this weekend, the FSB would have the private sector working on the taskforce “very soon”. The FSB, established in 2009, monitors and makes recommendations about the global financial system and its members include the central banks and finance ministries of the G20 countries as well as bodies like the IMF, OECD and international standards-setting organisations. Mark Carney chairs the body. Speaking at a press briefing ahead of the G20 summit today, Carney said that G20 countries had “promptly” implemented the recommendations from the FSB’s first report on increasing the resilience of the financial system, including risk-based capital requirements for banks.
In a new letter to G20 leaders, published today, the FSB addresses new risks and vulnerabilities to the financial system, one of which is climate change.
The FSB identifies three climate change risks that could impact the financial sector: physical risks, such as the impacts on insurance liabilities and the value of financial assets; liability risks; and transition risks that could result from moving to a lower-carbon economy.It says that access to better quality information will allow market participants to understand and manage these risks better and reduce the dangers to financial stability of abrupt shits. To this end, it recommends the establishment of a taskforce on climate-related disclosure, led by the private sector, following the successful example of the Enhanced Disclosure Task Force to improve post-crisis risks reporting by banks. Carney said that during discussions with the private sector, the FSB had identified that there was concern that over time climate-related risks will come into sharper relief. “We want to avoid a ‘Minsky moment’”, he said. “And make it a smooth transition.”
He added that disclosure on climate-risk by companies would not be regulation, rather the taskforce would use the work by many in the private sector on disclosure and try to bring it all together and establish voluntary principles.
Carney, arguably the most senior monetary policy official to tie climate change with climate, said the taskforce would identify the principles that would work best, but suggested that “consistency, reliability, comparability and efficiency” would play a role.
The proposal for a taskforce is in response to a request by the G20 in April to review how the financial sector can take account of climate- related issues.
Last month, Nick Robins, who co-led the UN Environment Programme’s high-level inquiry into the design of a sustainable financial system, said as a result of this a climate disclosure taskforce was likely to be announced by the FSB.