The Network for Greening the Financial System (NGFS) published the final report on bridging gaps in the climate risk data and offers actionable policy recommendations.
NGFS started a workstream on Bridging Data Gaps in July 2020, following which it published a progress report in May 2021. The progress report highlighted how persistent climate data gaps hindered the achievement of climate objectives and identified three building blocks to bridge these gaps. These building blocks were rapid convergence toward consistent set of global disclosure standards, efforts toward a minimally accepted global taxonomy, and use of well-defined and decision-useful metrics, certification labels, and methodological standards. The recently published final report on bridging data gaps advances a robust climate information architecture by laying out the rationale, organization, content, and the description of the “directory.” The directory can be thought of, and used, as a catalog of available climate-related metrics and data sources based on specific stakeholder use cases. The directory is intended to help financial sector stakeholders identify important and relevant climate-related data sources to meet their needs and facilitate access to the data, thus improving the broader dissemination of existing climate-related data. The report also makes actionable recommendations, building on initiatives, regulations, and policies that have emerged over the past months under the COP26 umbrella.
The report notes that the directory content can be used to draw evidence-based conclusions on the main climate-related data gaps and highlight key challenges to close such gaps. The report indicates that climate-related data lack relevant benchmarks, often rely on estimations and modeling, is sometimes incomplete, lack specific location information, and come at a cost that limits accessibility. Furthermore, forward-looking climate data are limited for transition risks while forward-looking metrics for physical risk data still remain a challenge, given that raw data items on biophysical impact and geospatial information are often unavailable. The report notes that further steps are urgently needed to improve the quality, availability, and comparability of climate-related data through increased reporting requirements, sector-based methodologies, technological innovation, and intensified cooperation among financial regulators, financial institutions, and non-financial sector stakeholders. This is why the NGFS work program for 2022-2024 sets out plans for the Workstream on bridging the data gaps to evolve into an internal data experts’ network following publication of this final report. The key policy recommendations follow and are closely linked with the “directory,” which will help in successful implementation of the recommendations going forward:
- Increase availability of granular data on emissions and improve reliability of reported climate-related data
- Intensify cooperation and coordination, foster the development of use cases in collaboration with the private sector, enhance the usability of statistical classifications, and increase linkage between taxonomies/classifications, disclosure, and data-related measures
- Increase the harmonization of forward-looking metrics by improving the availability of asset-level geographical data, assessing the level of maturity of forward-looking metrics to design specific public and private cooperation to harmonize methodologies, and fostering partnerships
Keywords: International, Banking, Insurance, Securities, Climate Change Risk, ESG, Sustainable Finance, Data Gaps, Disclosures, Taxonomy, Reporting, NGFS
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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