Following the publication of the IFRS sustainability disclosure standards in 2023, global efforts have focused on supporting jurisdictions and firms in using these standards and in ensuring disclosures are reliable and decision-useful.
Climate-related Risks
The FSB is coordinating internationally the work to address climate-related financial risks. These risks are global in nature, and will have effects across all entities, sectors and economies.
The occurrence of extreme climate events, as well as a disorderly transition to a low-carbon economy, could have destabilising effects on the financial system, including through a rise in risk premia and falling asset prices in the relatively short term. Climate-related risks may also be amplified by the financial system, across borders and across sectors.
Climate-related risks are far-reaching and differ from other risks to financial stability. Climate-related risks may be , and their effects on the financial system subject to substantial uncertainty and tail-risk. The effects are spread over long time horizons, and actions today may determine the severity of risks in the years ahead. The breadth of climate-related risks – including their possible simultaneous occurrence across multiple jurisdictions and sectors – also has implications for the resilience of the financial system. The actions needed are therefore both bottom-up and top-down, to address risks to individual entities and those to the system as a whole.
FSB roadmap for addressing climate-related financial risks
The FSB published in July 2021 a roadmap for addressing climate-related financial risks, including steps and timeframes needed to do so.
The roadmap coordinates work across standard-setting bodies and other international bodies to assess and address financial risks of climate change. It covers four main, interrelated areas:
Disclosures
Globally consistent and comparable disclosures by companies of their climate-related financial risks are increasingly important to market participants and financial authorities, in order to give financial markets the information they need to manage risks, and seize opportunities, stemming from climate change.
The FSB created the Task Force on Climate-related Financial Disclosures (TCFD) in 2015 to develop a set of voluntary disclosure recommendations for use by companies in providing decision-useful information to investors, lenders and insurance underwriters about the climate-related financial risks and opportunities that companies face. The TCFD, which brought together a wide range of users and preparers of financial reports, published its disclosure recommendations in 2017. The recommendations have become a widely-used basis for climate-related reporting, including in the International Sustainability Standards Board’s (ISSB), inaugural sustainability disclosure standards. The ISSB Standards will serve as a global framework for sustainability disclosures and, when implemented, will enable disclosures by different companies around the world to be made on a common basis. The FSB is working with the ISSB, IOSCO and other relevant bodies to promote the timely and wide use of the standards.
With the release of the ISSB Standards in 2023, the TCFD has been disbanded. The FSB continues to monitor work to strengthen the relevance, reliability and comparability of climate-related financial disclosures through its progress report on climate-related disclosures. The monitoring of progress on companies’ climate-related disclosures has been taken over by the IFRS Foundation.
Data
The specific nature of climate-related risks has implications for the data needed to monitor and assess their implications for financial stability. The FSB is working to establish a basis of comprehensive, consistent and comparable data that can be used to monitor and assess climate-related financial risks faced by both individual companies and by the financial system. This data should:
- Capture exposures of financial firms to climate-related risks, particularly those of a scale or concentration that might threaten financial stability.
- Support a global comparison and aggregation of financial firms’ exposures to climate-related risks.
- Support forward-looking assessments of climate-related risks to financial stability.
- Capture climate-related risk transfer and mitigation.
In July 2021, the FSB published a report examining the availability of data with which to monitor and assess climate-related risks to financial stability. As a result of this analysis, the FSB has identified important data gaps hindering such assessments and priority areas of work to address this. These include:
- Data on the drivers of climate-related risks to non-financial entities
- Data on non-financial entities’ exposure to climate-related risks
- Data with which to monitor and assess the exposures of financial institutions to climate-related risks
- Data to assess mitigants of financial institutions’ exposures to climate-related risks
- Data to assess the potential for widespread changes in risk premia due to climate change
- Data to assess the potential resilience of the financial system to widespread increases in risk premia
- Availability of data with which to perform scenario analysis
Vulnerability Analysis
The global, yet highly uncertain, nature of climate risks calls for further efforts to develop and refine the analytical tools used to assess climate-related vulnerabilities.
The FSB’s work aims to more systematically assess and better understand climate-related financial vulnerabilities and potential financial stability impacts. Our reports The implications of climate change for financial stability and Stocktake of financial authorities’ experience in including physical and transition climate risks as part of their financial stability monitoring are foundational for building greater understanding of the macro-level financial stability risks of climate change.
In November 2022, the FSB published a joint report with the Network for Greening the Financial System (NGFS) on climate-related scenario analysis. The report provides a synthesis of the findings from climate scenario analysis exercises undertaken by financial authorities at the individual firm level, at the level of the different financial sectors, and at the overall financial system level.
Regulatory and supervisory practices and tools
Supervisory and regulatory approaches to climate-related risks should be fully integrated within the overall supervisory and regulatory approaches to address financial risks.
In April 2022, the FSB published a consultation report on supervisory and regulatory approaches to climate-related risks. The report aims to assist supervisory and regulatory authorities in developing their approaches to monitor, manage and mitigate risks arising from climate change and, in particular, to promote consistent approaches across sectors and jurisdictions.
In October 2022, the FSB published a report on supervisory and regulatory approaches to climate-related risks. The report aims to assist supervisory and regulatory authorities in developing their approaches to monitor, manage and mitigate risks arising from climate change and, in particular, to promote consistent approaches across sectors and jurisdictions.
Progress is being monitored in consultation with the standard-setting bodies and other relevant international bodies. The FSB delivers an annual progress report to the G20.
Key Documents
12 November 2024
12 October 2023
Annual report takes stock of progress made over the past year by the International Sustainability Standards Board (ISSB), by national and regional authorities, and by firms in making disclosures.
Annual report takes stock of progress by standard-setting bodies and other international organisations on the actions coordinated through the Roadmap and outlines areas for further attention.
This FSB-NGFS joint report draws lessons for effective scenario analysis and sketches out the global perspective stemming from the various national/regional exercises conducted to date.
13 October 2022
Report presents progress and reviews actions taken by the International Sustainability Standards Board in developing the global minimum baseline disclosures standards as well as by individual jurisdictions and firms in improving climate disclosures.
This report aims to assist supervisory and regulatory authorities in developing their approaches to monitor, manage and mitigate risks arising from climate change and to promote consistent approaches across sectors and jurisdictions.
This first annual progress report presents a consolidated update on the progress made by the standard-setting bodies and relevant international organisations, across a wide variety of initiatives to assess and address the financial risk from climate change, and identifies areas that continue to require attention.
This report provides recommendations to assist supervisory and regulatory authorities in developing their approaches to monitor, manage and mitigate cross-sectoral and system-wide risks arising from climate change and to promote consistent approaches across sectors and jurisdictions.
The FSB roadmap sets out a comprehensive and coordinated plan for addressing climate-related financial risks, including steps and indicative timeframes needed to do so, and paves the way for implementation.
7 July 2021
This report examines the data needed to monitor and assess climate-related risks to the financial system, and proposes work to address current limitations and gaps.
TCFD Reports
Sixth and final report from the Task Force on Climate-related Financial Disclosures (TCFD) assesses firms’ disclosure practices in terms of their alignment with the 2017 TCFD Recommendations.
Annual report from the Task Force on Climate-related Financial Disclosures (TCFD) on TCFD-aligned disclosures by firms.
Annual report on TCFD-aligned disclosures by firms.
Annual report on TCFD-aligned disclosures by firms.
TCFD report on the disclosures of companies against the core elements of the TCFD recommendations.
26 September 2018
TCFD report on the disclosures of over 1,700 firms against the core elements of the TCFD recommendations.
Final report from the industry-led TCFD.
9 November 2015
FSB proposal to G20 recommends creation of task force to consider climate change risk.
