Two of the world’s major economies, the U.S. and the U.K., moved this week to make climate change-related risk disclosures the norm.
On either side of the Pond, governments are starting to take these storms more seriously. The U.S. Federal Reserve & U.K. Treasury have both released positions on climate risk disclosure, and their words are a bit of a jolt in the normally staid proceedings of central banks and finance ministries. In its latest Financial Stability Report, the Fed specifically calls out climate change as a near-term risk to the financial system. Climate change, it concludes, “increases the likelihood of dislocations and disruptions in the economy” and “is likely to increase financial shocks and financial system vulnerabilities that could further amplify these shocks.” On Nov. 9, the U.K.’s top treasury official, Chancellor of the Exchequer Rishi Sunak, took that one giant step further by, among other things, mandating that all major U.K. companies and financial institutions disclose their climate risk in line with the guidance set by the Taskforce on Climate-Related Financial Disclosures by 2025. By 2022, the U.K. expects 100% of “premium listed companies” such as BP Plc and Royal Dutch Shell, to have TCFD-aligned climate risk disclosures. By 2022, it expects 94% disclosure from bank and building societies, and 89% disclosure from insurers.