Speaker: Sam Gutterman
In 2016, the FSB asked Michael Bloomberg to chair a taskforce. With one eye on the crisis of 2008, the FSB was worried that a lack of information about (climate) risks can lead to a mispricing of assets / misallocation of capital and can potentially give rise to concerns about global financial stability "since markets can be vulnerable to abrupt corrections". While existing laws throughout the G20 require corporate disclosure of material risks, when it comes to climate risk, at best this tends to be relegated to a sustainability report.
The resulting report is very detailed, and covers four recommendations for forward-looking disclosures about climate risk that should appear within an organisation's financial filings. This will mean detailed scenario projections of future risk to corporate business models, supply chains and ultimately balance sheet and profitability.
Entities which are asked to comply include all listed companies, plus "asset owners" (ie all funded pension schemes) plus asset managers.
Adoption is voluntary, but a long list of prominent businesses have committed to the disclosures already. In the EU, there is already discussion about making the recommendations mandatory. An EU "High Level Expert Group on Sustainable Finance" is considering this as a part of a much larger package of policy recommendations.