IIF & EBF: Global Industry Survey Finds Firms Seek Alignment On Climate Risk Analysis, Measurement, And Disclosure Approaches

Respondents include 70 international financial firms with nearly $40T in total assets.

WASHINGTON D.C. & BRUSSELS – With a growing focus on sustainable finance, and particularly the need for a robust toolkit for climate risk management and disclosure, the Institute of International Finance (IIF) and European Banking Federation (EBF) today published the findings of a joint survey of their members.

The survey of 70 financial firms around the world, with total assets of nearly $40 trillion, finds that the streamlining of measurement and disclosure frameworks, and increased international collaboration, are key to strengthening the climate-related risk analysis and reporting toolkit.

“This report demonstrates the important industry efforts underway to develop methodologies to better understand, measure and disclose financial risks from climate change,” said Dr. Axel Weber, IIF Chairman and Chairman of the Board of Directors of UBS Group AG. “The IIF will work with and support its members as they continue these efforts and looks forward to increasing engagement with regulatory policymakers as they begin to develop climate risk supervisory frameworks.”

Among firms that are not yet disclosing data on financed emissions, more than 50 percent said they are hesitant to do so given the lack of standardized accounting frameworks and data challenges. Encouragingly, 70 percent of all respondents expressed interest the creation of a collaborative, open-source framework to enhance these climate finance tracking and reporting frameworks.

“The EBF is committed to support and contribute to the protection of the environment and will work closely with our members to develop tangible sector-wide initiatives,” said Jean Pierre Mustier, President of the European Banking Federation and Group Chief Executive Officer of Unicredit SpA. “Banks need to do more than ‘business as usual’ because now is the time to act and make an impact. We need to reduce our direct environmental impact by further cutting greenhouse gas emissions and moving towards renewable energy sources. We need to work to make an even bigger difference through our indirect emissions, by partnering with customers in the shift to a low carbon economy. Building a sustainable future is an important challenge that we must all address together.”

Other key findings include:

• Supply and demand of sustainable instruments is on the rise: More than half of respondents already issue their own sustainable instruments and 89 percent of respondents expect demand for sustainable investments to grow in 2020.
• Better processes needed for risk management: Over 45 percent of survey participants stated that their risk management framework includes an explicit process for identifying and assessing climate-related risks and opportunities. However, only 17 percent of respondents have fully integrated this process into their organization’s overall risk management framework. 
• Most financial firms at least partially follow the Task Force on Climate-related Financial Disclosures (TCFD) recommendations...: Overall, 60 percent of institutions are already implementing TCFD recommendations to some degree, with another 30 percent stating they are planning to do so in the future.
• ...but adoption of TCFD recommendations varies widely across geographies: Only 37 percent of emerging market respondents reported disclosing information aligned with TCFD recommendations, compared with more than 80 percent of respondents in developed Europe.

The full survey, “IIF/EBF Global Climate Finance Survey: A look at how financial firms are approaching climate risk analysis, measurement, and disclosure,” can be found here.

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About the IIF: The Institute of International Finance is the global association of the financial industry, with more than 450 members from more than 70 countries. Its mission is to support the financial industry in the prudent management of risks; to develop sound industry practices; and to advocate for regulatory, financial and economic policies that are in the broad interests of its members and foster global financial stability and sustainable economic growth. IIF members include commercial and investment banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks and development banks.

About the EBF: The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from 32 countries across Europe. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.