There have been two prominent examples recently where global frameworks and regulatory interventions have attempted to drive action on issues related to climate risk. In 2017, the United Nations Environmental Finance Initiative issued recommendations from the Financial Stability Boards taskforce on climate-related financial disclosures. Sixteen banks and 20 investor groups launched initiatives in 2018 to implement these recommendations. Eighteen insurance and reinsurance companies have joined forces to pilot these initiatives as well.
Under the Bank of England’s (BoE) climate stress test, insurers and banks operating in the United Kingdom will be forced to disclose their exposures to climate change and outline how they would respond to the effects of a temperature rise of up to 4°C.
The BoE has published proposals to test the performance and health of the United Kingdom financial system for a range of climate-linked financial risks. These tests are expected to uncover the extent of the financial sector’s exposure to climate risks, and gauge company responses. The BoE will initially release aggregate results for the banking and insurance sectors, although it has not ruled out publishing individual company results in the future.