In a significant move, the Federal Reserve, amongst other US regulators, has stopped the international attempt to make climate risk a primary aspect of global financial regulations, reports Bloomberg Law.
This decision comes despite the European Central Bank’s push for the Basel Committee on Banking Supervision to mandate lenders to reveal their strategies to fulfill their green commitments. The US officials have highlighted their limited mandate and have expressed concerns that the Basel Committee might be overreaching itself.
The Basel Committee is an international gathering of representatives from regulatory bodies and central banks, tasked to develop unified standards for banking supervision globally. However, the recent events reveal some discord in their direction, with differences in approach visible between US and European officials regarding the new standards.
This development raises pertinent questions about the role of financial institutions in addressing climate-related risks and their responsibilities in promoting environmentally sustainable practices. While some welcome the focus on established mandates, the push for more comprehensive environmental, social, and governance (ESG) considerations in banking supervision is also gaining momentum.