Voluntary Disclosure of Climate Risks Falls Short of Protecting Financial System
Basel Committee’s voluntary framework carves out loophole for U.S. financial regulators to avoid addressing financial risks caused by climate change
WASHINGTON, D.C. — The Basel Committee on Banking Supervision today published a long-awaited framework for the disclosure of climate-related financial risks. The Committee, which sets the primary global standards for bank regulations, stressed the voluntary nature of the framework, allowing domestic regulators to implement it only if they choose.
In response, Anne Perrault, senior finance policy counsel with Public Citizen’s Climate Program, issued the following statement:
“The framework provides critical acknowledgment of financed emissions as an important proxy for a bank’s transition risk. Investors, financial institutions, regulators, and the broader public need this information to understand risks not only to a given bank, but also to the broader financial system. The potential for “emissions laundering” remains, however, as the framework leaves key sources of financed and facilitated emissions—including, for example, from capital markets, financial advisory, and investment management activities—unaccounted for. This is a clear and growing source of risk that could undermine the utility of the framework if left unaddressed. Importantly, the voluntary nature of the framework, coupled with the Trump Administration’s climate change denial, means that investors and the public will likely go without disclosure from U.S. banks, leaving significant blind spots in our understanding of climate risk in the U.S. financial system.”