FSB outlines next steps on climate roadmap, following the finalisation of the global sustainability disclosure standards

The FSB has released its yearly progress report on the FSB Roadmap for Tackling Climate-Related Financial Risks. This report assesses the advancements made by the FSB, standard-setting bodies, and other international organizations in implementing the actions outlined in the Roadmap. Additionally, it highlights specific areas that require more focus and offers updates on the detailed Roadmap actions.
Climate-related events are increasing, leading to a growing focus on potential risks climate change poses to financial stability. Both physical risks and a disorderly transition to a low-carbon economy could destabilize the financial system. Extreme weather events and ongoing energy policy debates highlight the importance of effective risk management and financial system resilience.
Back in July 2021, the FSB published a comprehensive roadmap to address climate-related financial risks. It outlined key actions to be taken by standard-setting bodies and other international organizations over several years, focusing on four areas: firm-level disclosures, data, vulnerabilities analysis, and regulatory and supervisory practices. The G20 requested annual progress reports on the roadmap.
The recent annual progress report by the FSB highlights steady progress in all four areas of the roadmap:
1. Firm-level disclosures: The International Sustainability Standards Board (ISSB) published final standards (IFRS S1 and IFRS S2) for general sustainability-related and climate-related disclosures. These global standards will facilitate common basis reporting by companies worldwide. The International Organization of Securities Commissions (IOSCO) is urged to endorse the standards swiftly for widespread adoption. The ISSB will now monitor firms‘ adoption of climate-related disclosures. Future steps include promoting interoperability to avoid double reporting and developing a global assurance framework for sustainability-related corporate reporting.
2. Data: Efforts continue to improve the availability, quality, and cross-border comparability of climate data. The goal is to establish global repositories for open access to data, enabling the use of consistent and reliable climate-related risk metrics across sectors and jurisdictions. Additional work will focus on forward-looking metrics for climate-related risks.
3. Vulnerabilities analysis: Progress is being made in developing conceptual frameworks and metrics for monitoring climate-related vulnerabilities. Embedding climate scenarios in financial vulnerability monitoring and understanding cross-border and cross-sectoral transmission of climate shocks are areas for further development.
4. Regulatory and supervisory practices and tools: Initiatives to integrate climate-related risks into risk management and prudential frameworks are ongoing. A working group is being established to develop a conceptual understanding of the relevance of transition plans for financial stability. Close coordination among the FSB, standard-setting bodies, and other relevant entities is crucial given the numerous ongoing initiatives.
This present progress report emphasizes the importance of ongoing international coordination to address this issue’s significance for the global financial system. The FSB commits to publish annual progress reports, maintaining a flexible Roadmap to adapt to evolving insights into climate-related risks. Moreover, there is a growing focus on understanding nature-related risks, with initiatives by NGFS, OECD, and the World Bank to develop frameworks and analyses. The Annex includes an update on planned actions and deliverables from July 2022.