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    G7 Discusses Actions to Tackle Climate Change

    June 05, 2021

    HM Treasury published a Communique on the meeting of the G7 Finance Ministers in June 2021. The discussions involved concrete actions to address transformative effort to tackle climate change and biodiversity loss and to explore central bank digital currency and stablecoin projects. The Group welcomed the continued commitments to tackle climate change by financial firms worldwide and support the establishment of the Taskforce on Nature-related Financial Disclosures and look forward to its recommendations. To tackle climate change, G7 encouraged further consultation on a final proposal leading to the establishment of an International Sustainability Standards Board, ahead of the UN Climate Conference COP26.

    The following are the additional key highlights of the meeting: 

    • G7 supported moving toward mandatory climate-related financial disclosures that provide consistent and decision-useful information for market participants and that are based on the Task Force on Climate-related Financial Disclosures (TCFD) framework, in line with the domestic regulatory frameworks. The Group also agreed on the need for a baseline global reporting standard for sustainability, which jurisdictions can further supplement. The Group welcomed the IFRS program of work to develop this baseline standard under robust governance and public oversight, built from the TCFD framework and the work of sustainability standard-setters, involving them and a wider range of stakeholders closely to foster global best practice and accelerate convergence.
    • G7 recognized the growing demand for more information on the impact that firms have on the climate and the environment. It recognized that many jurisdictions and organizations are developing impact reporting initiatives, including but not limited to reporting on net zero alignment and broader sustainability metrics. G7 will work closely together among each other and with international partners to determine the best approach to ensure global consistency.
    • G7 authorities consider it important for financial firms to manage the financial risks of climate change using the same risk management standards as applied to other financial risks. The G7 Central Banks plan to assess the financial stability risks posed by climate change and will consider drawing on, as appropriate, scenarios published by NGFS. Central Banks will share lessons learned on taking climate-related risks into account in their own operations and balance sheets as appropriate and look forward to discussing, later in the year, how they might make their own disclosures based on the TCFD recommendations.
    • G7 reaffirmed the collective developed-country goal to mobilize USD100 billion annually for developing countries from public and private sources, in the context of meaningful mitigation actions and transparency on implementation. The Group committed to increasing and improving the climate finance contributions to 2025, including increasing adaptation finance and finance for nature-based solutions. 

    Also, the G7 central banks have been exploring the opportunities, challenges, and the monetary and financial stability implications of Central Bank Digital Currencies (CBDCs) and they committed to work together, as Finance Ministries and Central Banks, within their respective mandates, on their wider public policy implications. The objective is to ensure that the central bank digital currencies are grounded in long-standing public-sector commitments to transparency, the rule of law, and sound economic governance. The digital currencies should be resilient and energy-efficient; support innovation, competition, and inclusion, and enhance cross-border payments; these currencies should also operate within appropriate privacy frameworks and minimize spillovers. G7 will work toward common principles and publish conclusions later in the year. G7 also reiterated that no global stablecoin project should begin operation until it adequately addresses the relevant legal, regulatory, and oversight requirements through appropriate design and adheres to the applicable standards. 

     

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    Keywords: Europe, UK, Banking, Climate Change Risk, TCFD, CBDC, Stablecoins, G7, ESG, Digital Currencies, HM Treasury

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