BCB added sustainability dimension to its agenda in September 2020. The new dimension aims to promote sustainable finance, management of socio-environmental and climatic risks in the national financial system, and integration of sustainable variables in the decision-making process. The key measures included in the sustainability dimension are related to supervision, regulation, partnerships, and socio-environmental responsibility. The BCB president also signed a memorandum of understanding with the Climate Bonds Initiative (CBI); the partnership aims to exchange information on the promotion of sustainable finance and management of socio-environmental and climatic risks in the financial sector.
The sustainability dimension of the Agenda involves the following key measures:
- Structuring and broadening of the scope for collecting information on socio-environmental risks. This involves creation of document to collect qualitative data on both socio-environmental responsibility and climate risk assessment carried out by financial institutions for selected operations. It also involves automation of crossing exposure data with public information related to socio-environmental risk.
- Monitoring of climate risks and stress tests. This involves inclusion of climate risk scenarios in new and improved stress tests performed by BCB, in line with international recommendations and best practices.
- Regulatory enhancement of Resolution No. 4.327/2014. This involves inclusion of the concept climate risk, improvement of the definition of socio-environmental risk, and inclusion of requirements applicable to all types of risk such as risk appetite statement, stress tests, and business continuity and governance plan.
- Better transparency based on Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Improvement of criteria for climate-related financial disclosures by financial institutions, focusing on the risks and opportunities related to climate-related issues, as well as studying specific aspect of TCFD recommendations that can be incorporated into the prudential regulatory framework of BCB.
- Creation of a "green liquidity facility." This involves a feasibility study, analysis, and subsequent implementation of new facilities for financial institutions, whose collaterals can be private credit operations or private securities.
- Management of international reserves. This covers inclusion of sustainability criteria for the selection of counterparties in the management of international reserves and for investment decisions.
- Joining of the Network for Greening the Financial System (NGFS). BCB joined NGFS to benefit from the exchange of experiences and best practices of central banks about socio-environmental issues, improvement in data analysis and mitigation of socio-environmental risks in the financial system, and strengthening of partnerships with other central banks and international organizations.
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Keywords: Americas, Brazil, Banking, ESG, Climate Change Risk, Climate Change Initiative, Climate Bonds Initiative, Stress Testing, NGFS, Sustainable Finance, Disclosures, TCFD, BCB
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