The Basel Committee on Banking Supervision reported that the majority of its members are currently undertaking multiple regulatory and supervisory climate-related financial risks initiatives. The overwhelming majority are conducting research related to the measurement of such risks, while many have specifically identified challenges to evaluating financial risks because of issues regarding data availability, the lack of harmonized and “robust analytical frameworks” to assess such risks, and difficulties in evaluating how transitions to a low carbon economy affect different sectors, regions and markets and ultimately the financial system.
Separately, the International Organization of Securities Commissions issued an overview of how regulators are currently supporting sustainable finance initiatives. According to IOSCO, 83 percent of 34 responding regulators note they facilitate sustainable investments by promoting transparency, while 43 percent noted they do so by prohibiting greenwashing. (Greenwashing is a form of marketing that overstates or deceptively promotes an organization's products, aims or policies as environmentally friendly when it is not the case.) Forty-one percent define ESG risks as financial risks that must be managed and disclosed while 14 percent affirmatively promote investments of capital in sustainable investments. Sixty-two percent of all responding regulators said their mandates do not include any explicit references to ESG. In a poll of market participants, a commonly expressed concern was the meaning of sustainable investments and sustainability risks and the absence or low quality of relevant data.
(ESG – which stands for environmental, social, and governance – references three principal factors related to the measurement and ethical impact of an investment in a business or enterprise.)