Climate change could give rise to significant longterm risks for financial institutions. Transparency by supervised entities about their climate-related financial risks is a first important step towards identifying, measuring and managing these risks. FINMA has identified a need for regulatory intervention on the disclosure of climate-related financial risks and updated the disclosure rules for large market participants during the year under review. More uniform and comprehensive disclosure of the large financial market players’ climate-related risks promotes greater transparency and market discipline and will also improve comparability over time.
FINMA’s aim is to have a proportional and principles-based approach to this disclosure. Banks and insurers in categories 1 and 2 will be required to make their climate-related risks transparent alongside the financial risks they already disclose. The regulatory approach being taken by FINMA is based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which are widely recognised internationally. A number of category 1 and category 2 banks and insurers have already committed to disclosing their climate-related financial risks on the basis of the TCFD principles.
FINMA carried out a pre-consultation on the proposals for a change in disclosure practice. It therefore invited representatives from the banking, insurance and asset management sectors, various NGOs, academics and officials to a regulatory roundtable in the summer of 2020. This is a format available to the Board of Directors. FINMA’s regulatory approach met with broad agreement at the roundtable.
After carrying out the interdepartmental consultation, FINMA launched the public consultation in November 2020.
The revised disclosure circulars were approved and entered into force by the end of May 2021.