It is now widely accepted that climate-related and environmental risks pose significant challenges for the global economy, which may in turn impact financial stability. The financial services industry could be significantly impacted under different climate scenarios and by environmental risks; at the same time, it has the capacity to manage its exposure to, and help mitigate, these risks as they continue to manifest in coming years. The financial industry is ready and willing to engage further with the relevant global standard-setting bodies, prudential authorities, and others to help shape effective prudential approaches for climate-related and environmental risks.
Financial authorities, including prudential authorities, supervisors and central banks, are currently re-examining their mandates, frameworks, and policy toolkits to tackle these risks. Recent surveys and reports by the Financial Stability Board (FSB), the Basel Committee on Banking Supervision (BCBS), and the International Association of Insurance Supervisors (IAIS) indicate that many authorities are already adopting policies and regulations and adjusting supervisory practices. While this determination is encouraging, an uncoordinated and rapid proliferation of new policies — given significant uncertainties and knowledge gaps — can create a fragmented, and potentially less effective, policy landscape.
The objective of this paper is to communicate global industry views on the rapidly evolving set of supervisory and regulatory approaches to climate-related and environmental risks facing the banking and insurance sectors, identifying industry perspectives on what an appropriate and efficient approach could look like. Drawing on a review of supervisory and industry practices, this paper reflects current thinking among IIF members, which is likely to evolve naturally over time based on experience and engagement with prudential authorities