UK and EU regulators have published papers on the regulatory response to the risks of climate change.
- the BoE has published a discussion paper on how it proposes to carry out its “biennial exploratory scenario” in 2021 that will stress test the business models of the largest banks, insurers and the financial system to climate-related risks. The paper proposes a two-part exercise, that splits out the risks and the responses, and looks at the scenarios and modelling approaches and the submissions BoE wants from firms. BoE seeks comments by 18 March 2020;
- FCA has published notes from its November 2019 climate financial risk forum. The forum focussed on striking the right balance around granularity and prescriptiveness of the forum recommendations, and addressing the challenges around data integrity. It also discussed consulting with the wider industry in early 2020; and
- the EU has reached political agreement on a common classification system intended to encourage private investment in sustainable growth and contribute to a climate-neutral economy. The new taxonomy would help businesses and investors to more easily identify what activities would be considered environmentally sustainable. The EU hopes the proposed Regulation will reduce fragmentation that results from market-based initiatives and national practices and will reduce what it describes as “greenwashing” – that is, marketing of financial products as green or sustainable when they are not. See also our previous post.