Climate Risk Management Program

active

Climate Risk is a priority for Basel Committee on Banking Supervision (BCBS) as seen in the release of the document on the Principles for Effective Management and Supervision of Climate-related Financial Risks. The document provides an overview of the guidelines that will eventually be translated into regulatory rules by central banks/supervisors globally. It complements Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). These two relatively new frameworks are regarded as complex and ambitious, thus daunting to a lot of FIs. However, if they are supported to take an incremental approach, and move step by step, they will gain more confidence and build up their commitment. When banks complete all the components of the Climate Risk program, it is likely that they will become TCFD´s endorsers and will be better prepared to continue their transformational journey to be champions of sustainability and sustainable/green finance. Within IFC, as part of the Climate Action Plan of 2021-2025, FIG commits that 85% of its investments will be aligned with Paris Agreement goals starting from July 1st, 2023, and 100% starting from July 1st 2025. This is expected to require additional support for investment teams and for clients in assessing FIs climate risk management capabilities and providing guidance for them in action plan development and monitoring of the use of proceeds as well as the climate physical risk vulnerability both at portfolio and transaction level.