Central Bank Governor Gabriel Makhlouf has written to the chairs and CEOs of regulated financial companies to remind them of their obligations around climate change.
The Central Bank also said that it has endorsed the “Glasgow Declaration” made at COP26 today by the Network for Greening the Financial System, which is made up of central banks and regulators from around the world.
The declaration says members commit to “deepen, expand and strengthen their collective efforts towards greening the financial system, to improve the resilience of the financial system to climate-related and environmental risks, and encourage the scaling up of the financing flows needed to support the transition towards a sustainable economy”.
In his letter, Governor Makhlouf writes that “climate change does require action on the part of all participants in the financial sector”.
He also says there is a need for those leading financial institutions to “lead and drive the climate and broader environmental, social and governance agenda within their firms”.
The governor’s letter explains that the bank’s supervisory approach to climate issues is “informed” by regulatory developments at EU level.
The letter goes on to state that the expectations of the bank “are not prescriptive in nature, and they are not set out at a granular level of detail”.
They are also not binding upon firms.
The Central Bank’s supervisory expectations focus on governance, risk management frameworks, scenario analyses, strategy and business model risk and disclosures.
The letter states that firms need to ensure they “do not engage in the practice of greenwashing”.
The Central Bank is to establish a Climate Risk and Sustainable Finance Forum, which will be known as the Climate Forum to share best practice on embedding climate risk considerations within companies.
Its first meeting is expected to take place in the first half of next year.