June 05, 2019

FSB welcomed the 2019 status report on climate-related financial disclosures. The report was released by the industry-led Task Force on Climate-related Financial Disclosures (TCFD). The status report provides an overview of the extent to which companies included, in their 2018 reports, information aligned with the core TCFD recommendations, which were published in June 2017.

  • The information to be provided by a third party seeking authorization to assess the compliance of securitizations with the STS criteria provided for in Securitization Regulation should enable a competent authority to evaluate whether and, to what extent, the applicant meets the conditions of Article 28(1) of the Securitization Regulation. An authorized third party will be able to provide STS assessment services across EU. The application for authorization should, therefore, comprehensively identify that third party, any group to which this third party belongs, and the scope of its activities. With regard to the STS assessment services to be provided, the application should include the envisaged scope of the services to be provided as well as their geographical scope, particularly the following:

    • To facilitate effective use of the authorization resources of a competent authority, each application for authorization should include a table clearly identifying each submitted document and its relevance to the conditions that must be met for authorization.
    • To enable the competent authority to assess whether the fees charged by the third party are non-discriminatory and are sufficient and appropriate to cover the costs for the provision of the STS assessment services, as required by Article 28(1)(a) of Securitization Regulation, the third party should provide comprehensive information on pricing policies, pricing criteria, fee structures, and fee schedules.
    • To enable the competent authority to assess whether the third party is able to ensure the integrity and independence of the STS assessment process, that third party should provide information on the structure of those internal controls. Furthermore, the third party should provide comprehensive information on the composition of the management body and on the qualifications and repute of each of its members.
    • To enable the competent authority to assess whether the third party has sufficient operational safeguards and internal processes to assess STS compliance, the third party should provide information on its procedures relating to the required qualification of its staff. The third party should also demonstrate that its STS assessment methodology is sensitive to the type of securitization and that specifies separate procedures and safeguards for asset-backed commercial paper (ABCP) transactions/programs and non-ABCP securitizations.

    The use of outsourcing arrangements and a reliance on the use of external experts can raise concerns about the robustness of operational safeguards and internal processes. The application should, therefore, contain specific information about the nature and scope of any such outsourcing arrangements or use of external experts as well as the third party's governance over those arrangements. Regulation (EU) 2019/885 is based on the draft regulatory technical standards submitted by ESMA to EC.

     

    Related Links

    Effective Date: June 18, 2019

    Press Release
  • Proposed Rule 1
  • Proposed Rule 2
  • Proposed Rule 3
  • Presentation on Regulatory Framework (PDF)
  • Presentation on Resolution Plan Rules (PDF)
  • The TCFD recommendations provide a framework for companies and other organizations to develop more effective climate-related financial disclosures through their existing reporting processes. As part of its efforts to promote adoption of the recommendations, TCFD prepared this status report to provide an overview of current disclosure practices as they relate to the recommendations, highlight key challenges associated with implementing the recommendations, and outline some of the efforts TCFD will consider undertaking in coming months to help address some of the implementation challenges.

    To better understand the climate-related financial disclosure practices and how they have evolved, TCFD reviewed reports for over 1,100 companies from 142 countries in eight industries over a three-year period. In addition, TCFD conducted a survey on companies’ efforts to implement its recommendations as well as on user views on the usefulness of climate-related financial disclosures for decision-making. While the Task Force found some results of its disclosure review and survey encouraging, it has concerns that not enough companies are disclosing decision-useful climate-related financial information. This could be problematic for financial markets if market participants do not have sufficient information about the potential financial impact of climate-related issues on companies. The key findings from the disclosure review and survey results include the following:

    • Disclosure of climate-related financial information has increased since 2016, but is still insufficient for investors.
    • More clarity is needed on the potential financial impact of climate-related issues on companies.
    • Of companies using scenarios, the majority do not disclose information on the resilience of their strategies.
    • Mainstreaming climate-related issues requires the involvement of multiple functions.

    FSB has asked the TCFD to deliver another status report to FSB in September 2020. TCFD will undertake further work during the course of the next year to promote and monitor adoption of the its recommendations. TCFD is considering additional work to clarify elements of its supplemental guidance, develop process guidance around how to introduce and conduct climate-related scenario analysis, and identify business-relevant and accessible climate-related scenarios.

     

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    Keywords: International, Banking, Insurance, Securities, Climate Related Risks, TCFD, Disclosures, Status Report, FSB

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