The Financial Stability Board (FSB) published a report on the status of financial authorities’ initiatives related to the identification and assessment of nature-related financial risks. It outlines current and future regulatory and supervisory initiatives. The report will be delivered to the G20 Finance Ministers and Central Bank Governors at their upcoming meeting in Rio De Janeiro. It discusses how nature degradation is a financial risk and how authorities across different jurisdictions are responding. The report shows that financial regulators are at different stages of evaluating nature-related financial risks. Many have concluded that there is a significant financial risk while others continue to monitor the situation.

Financial regulators that have analyzed the situation categorize climate-related financial risks into two categories: physical and transition risks. Their work shows that financing activities and investments have significant exposure to physical risk of climate-related incidents.  While there is currently no standardized approach across jurisdictions there is a general recognition that more expertise is needed. This includes an increased level of expertise across the supervisory authorities, central banks and the private sector to address these issues and improve the data, modeling and regulatory challenges.

Click here to read the full report.