The Irving Fisher Committee on Central Bank Statistics (IFC) of the Bank for International Settlements (BIS) published a Bulletin, which summarizes proceedings of the international conference on "Statistics for Sustainable Finance." The Bank of France and the Deutsche Bundesbank were the co-organizers of this conference, which centered on the progress achieved in developing sustainable finance statistics, the remaining challenges, and the opportunities opened up by technology innovation.
Along with a summary of the discussions and outcomes of the conference, the Bulletin presents keynote speeches, results of an IFC survey on sustainable finance data for central banks, as well as the presentations and other materials from various central banks and/or supervisors. The Bulletin notes that central banks have been at the forefront of the efforts to identify the core climate-related information needs and develop alternative solutions to address them. The most important data gaps identified include the lack of granular firm or asset-level data to meaningfully measure the carbon footprint of economic and financial activities. In addition, there is a need to establish forward-looking data. In both cases, the data currently available lack reliability and comparability, which would be essential if physical and transition risks are to be properly measured and monitored. The Bulletin highlights that addressing sustainable finance data gaps requires careful prioritization. In the medium to long run, there is a clear need for more comprehensive datasets, with greater consistency and quality. The promotion of common international standards is the prerequisite for the efficient development of adequate statistical definitions and classifications (or taxonomies). Common standards would also ensure that the collected data are articulated with policy objectives and subject to proper disclosure requirements—which is the key to guiding investors and pricing the related risks effectively.
To effectively address the sustainable finance data gaps, key focus areas would be harmonizing the various concepts, methodologies, and processes involved in sustainable finance and ensuring consistency between the various national initiatives undertaken to collect sustainable finance data. The Bulletin also notes that exploiting the less conventional data sources and tools might be an important way of bridging existing information gap. For example, innovative text-mining techniques could help to extract relevant information from firms’ climate-related disclosures, with granular firm-level data scraped from the web and used to estimate missing greenhouse gas emission data. Similarly, artificial intelligence approaches can be used to better monitor and understand the development of sustainable finance. Last but not the least, more and better cooperation between stakeholders is required, especially with the private sector and academia and between jurisdictions. Such cooperation is essential for taking stock of useful statistical initiatives (for instance, regarding ESG data catalogs and information repository hubs), promoting best practices (for example, for leveraging new approaches, compiling data in the required formats, or presenting information in useful dashboards), and identifying novel climate-relevant indicators.
Related Link: IFC Bulletin on Statistics for Sustainable Finance
Keywords: International, Banking, Sustainable Finance, ESG, Climate Change Risk, Transition Risk, Artificial Intelligence, Data Gaps, Financial Stability, Reporting, Disclosures, Regtech, IFC, BIS
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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