Legal & Regulatory News

NGFS issues climate-related and environmental risks recommendations

The Network for Greening the Financial System (NGFS) has released a new technical document, 'Guide for Supervisors: Integrating climate-related and environmental risks into prudential supervision' (the Guide). The Guide sets out the NGFS's five recommendations for supervisors in terms of integrating climate-related and environmental risks into supervision. The guidance follows from the NGFS's previous report, 'A Call for Action', which was released in 2019.

The five key recommendations for supervisors set out in the Guide are as follows:

1. determine how climate-related and environmental risks transmit to the economies and financial sectors in their jurisdictions and identify how these risks are likely to be material for the supervised entities;
2. develop a clear strategy, establish an internal organisation and allocate adequate resources to address climate-related and environmental risks;
3. identify the exposures of supervised entities that are vulnerable to climate-related and environmental risks and assess the potential losses should these risks materialise;
4. set supervisory expectations to create transparency for financial institutions in relation to the supervisors’ understanding of a prudent approach to climate-related and environmental risks; and
5. ensure there is adequate management of climate-related and environmental risks by financial institutions and take mitigating action where appropriate.

Click here to access the Guide.