October 21, 2022

FSB Finalizes Recommendations on Approaches to Climate-Related Risks


On October 13, 2022, the Financial Stability Board (“FSB”) released a report (the “Report”) on “Supervisory and Regulatory Approaches to Climate-Related Risks.”1 The Report finalizes recommendations for banking and insurance regulators to oversee climate-related financial risks at the country-wide and institution levels.

We previously analyzed the interim version of the Report and refer you to our earlier publication for a more detailed discussion. In this Legal Update, we highlight the changes in the Report from the interim version.

Final Report

The Report generally follows from the interim version, and many sections, including most recommendations, are almost identical. However, there are a few notable shifts.

  1. Reporting. The Report recognizes in several sections that reporting of climate-related risks is a developing area that should be imposed as an obligation that is proportionate to the nature, size, and risk profile of a financial institution’s activities. This is because larger institutions are likely to have more resources and capabilities to develop the needed data. Also, national regulators should take the burden of reporting into account when imposing requirements (to avoid undue burden) and may not need to rely on financial institutions to provide all desired information. Further, reporting is expected to change over time, and progress on improving the granularity, comparability and reliability of reports may not happen all at once.
  2. Stress Testing. The Report downplays the concept of climate stress testing and appears to disconnect it from climate scenario analysis. Climate stress testing has been a controversial issue in some jurisdictions, with concerns regarding the appropriateness of imposing climate-related capital requirements and the availability of data to impose broad stress testing obligations. The Report deletes several references to climate stress tests and focuses on scenario analysis as the analytical tool that will be developed in the early stages of climate risk management. This is consistent with recent activity in the United States, where the Federal Reserve is engaged in a climate scenario analysis exercise with some of the largest US banks.
  3. National Mandate. The Report adds language to better recognize that regulators in different jurisdictions may have different legal mandates. For example, the United States typically relies on a single-materiality approach and does not authorize banking regulators to determine the types of sectors a bank may service. These types of national constraints are now mentioned in more places in the Report.
  4. Legal Entity Identifier. The Report suggests that national regulators consider adding the Legal Entity Identifier to climate reporting requirements to track data on financial institutions’ counterparties and improve the reliability of reported data. This ties more broadly to the theme that data on climate-related risk may come from outside of the financial sector, such as data that is disclosed to financial institutions by non-financial corporates (e.g., greenhouse gas emissions).


The FSB recommendations do not have the force of law and will need to be acted on by national legislators or regulators before affecting financial institutions. As the Report recognizes, this may be a lengthy process that reflects each jurisdiction’s approach to financial institution regulation. Further, in the United States this likely means use of the notice-and-comment rulemaking process to solicit further public feedback prior to imposing obligations and other requirements.

Additionally, the Report emphasizes the absence of adequate climate risk data and the prospect of developing data through mandatory collections and standardized cross-border collaboration. This evenhanded approach stands in contrast to proposals in the United States, which have focused more on the mandatory part, and less on standardized collections or cross-border collaboration. We expect there to be continued pressure from industry for governments to recognize the burdens associated with duplicative and rushed data collection requirements.



1 Press Release, FSB publishes recommendations for supervisory and regulatory approaches to climate-related risks and calls for continued progress on disclosures (Oct. 13, 2022), https://www.fsb.org/2022/10/fsb-publishes-recommendations-for-supervisory-and-regulatory-approaches-to-climate-related-risks-and-calls-for-continued-progress-on-disclosures/.

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