Complying with FINMA’s new transparency obligations for climate risks
On 31 May 2021, the FINMA published updates to its disclosure circulars specifying transparency obligations regarding climate risks for Category 1 and 2 banks, insurance companies as well as insurance groups. They follow the Task Force on Climate-related Financial Disclosures (TCFD) recommendation structure and require disclosures to be in place for the 2021 financial year annual report.
This is the first hard regulatory requirement on climate risks by FINMA and certainly not the last. For smaller banks and insurers, it is thus nonetheless time to prepare.
We have a proven track-record of successfully supporting financial services companies both in Switzerland and globally with their TCFD integration.
We offer a unique and comprehensive combination of services:
- We provide climate risk governance assessments (EU Action Plan, TCFD, and expected FINMA Compliance);
- We help you design your ideal climate-risk governance solution and help support its end-to-end implementation including:
- Integration in Board and Exec committees’ Terms of Reference,
- Review of senior management objectives
- Inclusion of climate related objectives in remuneration strategies, KPIs, communication, change management
- HR, integration to risk governance infrastructure
- We help you assess the impact of climate risk on your commercial strategy
- We support you with analysing physical and transition risk using different scenarios
- We help you design stress scenarios for climate risk analysis, and navigate data complexities to cover different portfolios, products and third parties
- We advise you with implementation of conclusive climate risk results to be used in developing the company’s overall business strategy
- We provide end-to-end implementation support (automation of product-level climate risk categorisation, disclosures);
- We support you to integrate your clients’ climate risks preferences and recategorise your clientele
- We help you understand the correlation and potential impact of climate change and its associated risks
- We support you to identify transmission channels relevant for your exposure profile
- We help you to identify sectoral and geographical concentrations of climate-related risks and assess their materiality
- We support you to produce comprehensive documentation of tools and methodologies in line with industry best practices on model risk management
- We offer solutions to mitigate climate risk exposure (e.g. reduction of physical risk, evaluation of diversification strategies).
- We help you define insightful climate risk metrics on appropriate level of granularity
- We evaluate your current preferred sustainability metrics and their FINMA/EU Action Plan compliance;
- We provide TCFD (or other recognized standards) gap assessments;
- We provide assurance over your climate risk data and reporting
- We help you communicate on your climate risk integration methodology at both entity and product-level.
The risks associated with climate change are complex and pervasive. Translating the output of climate risk models into critical decision-making climate analytics requires bridging informational gaps and bringing various business units together. It also means navigating the uncertainty that comes with the rapidly evolving field of climate risk management and regulatory requirements.
We have helped numerous client with the unique challenges arising from tackling climate-related financial risks and we would be happy to help your company ensure compliance with these new and upcoming reporting obligations.