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30 November 2020

Central banks and governments signal concern over climate risks

In a supervisory guide published on November 27th, 2020, the European Central Bank issued guidelines for the management and disclosure of climate and environmental risks to all Euro area institutions. The guide outlines a host of expectations for the supervision of climate risks in the interest of securing the area’s institutions take a strategic, forward-looking, and comprehensive approach to considering these risks.

This concern was echoed by the US Federal Reserve which listed in a Financial Stability Report released in November 2020, climate change among short-term risks to the country’s financial stability. Similarly, the UK announced, on November 9th, that large companies and financial institutions would be required to state climate risks by 2025 in an effort to support the country’s carbon-neutrality goals.

These moves by regulators and supervisory authorities are among the clearest indications of the impact of the Paris agreement and subsequent climate plans issued by countries across the world which are forcing such institutions to instate measures to align markets with these greater, societal goals.

ECB supervisory guide
Federal Reserve report
The Guardian on the UK requirements