By Virginia Furness and Marc Jones
LONDON (Reuters) -The world’s forum for banking regulators published a framework for disclosing climate-related risks on Friday, making the implementation voluntary, following pushback from the U.S.
The Basel Committee on Banking Supervision, made up of banking regulators and central bankers from the G20 economies and other countries, said it would be up to national regulators to decide whether to require banks to disclose climate-related risks, a proposal that has been under discussion for years.
In a statement, the committee said it acknowledged “that the accuracy, consistency and quality of climate-related data are evolving, and therefore it is necessary to incorporate a reasonable level of flexibility into the final framework.”
Policymakers and banking regulators around the world have been debating the extent to which climate change should be embedded into regulation and central bank policy, a tussle analysts say is likely to shape decision making.
The framework asks banks to identify how climate risk could impact their financial returns and risk profile and map how they intend to respond to it.
It asks them to consider both “physical risk” like flooding and heat stress and “transition risk”, which includes changes to climate policy affecting agriculture.
In Europe, authorities have been ramping up efforts to address climate-related risks, with the European Central Bank and others making management of climate risks a key priority.
In the U.S., however, efforts have been scaled back or even shelved under the new administration of President Donald Trump.
In January, the Federal Reserve withdrew from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), the main global body devoted to policing climate risk in the financial system, while a number of top U.S. commercial banks have dropped climate targets.
The updated framework follows a lengthy consultation process which resulted in several changes to Basel’s original proposal, first published in November 2023, the Basel Committee said.
As well as stressing the voluntary nature of the proposal, the Basel Committee removed the requirement for banks to report on the carbon emissions associated with their capital markets activities and trading, known in the industry as “facilitated emissions.”
The committee said it would monitor relevant developments, including the implementation of other reporting frameworks and disclosure practices, and consider whether any revisions to the framework would be warranted in future.
(Editing by)
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