NGFS Publishes Progress Report on Bridging Gaps in Climate Data
NGFS published a progress report that forms part of the first phase of the work program of the NGFS workstream on bridging the data gaps in context of climate-related risks. The report sets out issues that need to be considered going forward, thus laying the groundwork for a comprehensive assessment of climate-related data needs and gaps. The progress report also constitutes a valuable input to nourish the work on climate-related data undertaken at the international level by FSB and G20. Additionally, certain documents related to the NGFS scenarios are being planned for release shortly. NGFS also announced that the Reserve Bank of India (as a member) and the FSB (as an observer) have recently joined the Network.
The report highlights that reliable and comparable climate-related data are crucial for financial sector stakeholders to assess financial stability risks, properly price and manage climate-related risks, and take advantage of the opportunities arising from the transition to a low-carbon economy. However, persistent gaps in climate-related data hinder the achievement of these objectives. Stakeholders report the need for more forward-looking data (for example targets or emissions pathways) and granular data
(for example, geographical data at entity and asset-levels). Stakeholders are also calling for assurance about the quality of climate-related data through verification and audit mechanisms as well as improvements in data accessibility. The report notes that a mix of policy interventions is needed to catalyze progress toward better data, based on the following three building blocks:
- Rapid convergence toward a common and consistent set of global disclosure standards
- Efforts toward a minimally accepted global taxonomy
- Development and transparent use of well-defined and decision-useful metrics, certification labels, and methodological standards
Going forward, NGFS will continue its evidence-based identification of the most prevalent data gaps—including by further engaging with other stakeholders such as non-financial corporates, data providers, and ratings agencies—and issue recommendations on how to bridge them. NGFS will examine possible recommendations for increasing data availability, including initiatives that make data available free of charge or at nominal cost to cover data processing. NGFS will also consider the types of verification scheme that could enhance the quality of raw data items and issue recommendations for achieving greater transparency and comparability on methodologies. To develop policy recommendations to help bridge data gaps, NGFS will, in liaison with relevant stakeholders:
- identify how the progressive harmonization of metrics and methodological standards, certification labels, and taxonomies can contribute to the reliability and comparability of data, together with a wider implementation of mandatory disclosures in financial statements. In doing so, NGFS will engage with relevant stakeholders, including non-financial corporates and methodology providers.
- examine how publicly accessible databases can improve data availability and comparability. In doing so, NGFS will reach out to initiatives that pool climate-related raw data in a single point and to relevant stakeholders in the field of geospatial data, focusing on the use of new technologies (such as artificial intelligence).
This report was informed by a systematic literature review, outreach to a variety of international organizations and other relevant stakeholders, and various closed-door workshops. NGFS will continue to leverage the best practices identified within its membership to help central banks and supervisors, as well as the relevant stakeholders, to better assess and mitigate climate-related risks.
Related Links
Keywords: International, Banking, Insurance, Securities, Climate Change Risk, Sustainable Finance, ESG, Data Gaps, Scenarios, Disclosures, Taxonomy, Certification Labels, Regtech, Artificial Intelligence, NGFS
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Michael Denton, PhD, PE
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.
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.