Climate change: Recent regulatory developments in the financial sector
In the financial sector, policy makers, regulators, and supervisors have been tackling climate change proactively. This report outlines major regulatory and supervisory developments relating to climate change in the financial sector in 2020 and then discusses possible future trends.
Around five years have passed since the ‘2030 Agenda for Sustainable Development’ and the ‘Paris Agreement’ were both adopted in 2015. Progress has been made world-wide to tackle climate change. More than 110 countries and jurisdictions have expressed their intentions to work towards ‘Net-zero by 2050’.
Climate-related regulatory developments have made progress in the financial sector. For example, at a global level the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) created climate scenarios that could be used by supervisors as well as financial institutions. Moreover, at regional and jurisdictional levels regulators and supervisors have worked on climate-related information disclosures and climate-related stress testing.
The trend observed in 2020 is expected to continue for the coming years. It is essential for all financial institutions to take climate and environment-related issues as an opportunity to make their business sustainable, not to consider them as merely a ‘compliance exercise’.