Banks'Guideline Unveiled by Basel Committee on Climate Risks Disclosure
Basel Committee Announces Voluntary Climate-Related Risk Disclosure Framework
The Basel Committee on Banking Supervision (BCBS) has unveiled a new framework for the disclosure of climate-related risks by banks. The announcement, made in June 2025, marks a significant step in the BCBS's holistic approach to addressing climate-related financial risks to the global banking system.
However, the framework has been made voluntary, meaning jurisdictions will consider whether to implement it domestically. This decision has been attributed to pressure from the United States and global regulatory sensitivities, which has led to a softening of the BCBS's initial ambition to establish a mandatory global Pillar 3 disclosure regime.
The voluntary nature of the framework allows for flexibility in implementation, but it may lead to uneven adoption and disclosure quality globally. Julia Symon, Head of Research and Advocacy at Finance Watch, has criticized this approach, describing it as "one step forward, two steps back."
The new framework includes qualitative and quantitative disclosures related to climate governance, strategy, physical and transition risks, and financed emissions. However, some requirements such as capital markets emissions and sectoral reporting have been diluted to accommodate the voluntary approach.
Symon has expressed concern that different banks will define materiality in different ways, which could lead to inconsistencies in disclosures. She further emphasized that climate change affects banks everywhere, and those banks are deeply interconnected. Therefore, the treatment of climate risks as optional in one jurisdiction could have widespread implications.
The framework requires jurisdictions to disclose qualitative factors about banks' governance, controls, and procedures for managing climate-related financial risks. Initially, the BCBS stated that it would determine which elements of the framework would be mandatory and which subject to national discretion.
However, U.S. regulators have reportedly pushed back against the climate risk disclosures. In response, the BCBS has incorporated a reasonable level of flexibility into the final framework to address these concerns.
Despite the voluntary nature of the framework, it has influenced supervisors like the UK Prudential Regulation Authority (PRA), which is proposing stronger climate-related supervisory expectations for banks and insurers. This signals growing regulatory momentum and scrutiny within some jurisdictions.
While the voluntary framework may delay the establishment of a uniform global standard for climate risk disclosure in banking, it could act as a stepping stone towards more consistent future regulation as practices and data improve. The BCBS's decision to balance ambition with feasibility reflects ongoing debate and differing regulatory priorities internationally on how aggressively to address climate risks through banking supervision.
- The voluntary Climate-Related Risk Disclosure Framework announced by the Basel Committee on Banking Supervision (BCBS) could lead to uneven adoption and variations in disclosure quality among different jurisdictions, as dominated by Julia Symon, Head of Research and Advocacy at Finance Watch.
- The decision to make the BCBS's Climate-Related Risk Disclosure Framework voluntary, due to pressure from the United States and global regulatory sensitivities, has signaled growing regulatory momentum and scrutiny in certain jurisdictions, such as the UK Prudential Regulation Authority (PRA), proposing stronger climate-related supervisory expectations for banks and insurers.
