On Thursday, March 14, the Institute of International Finance (IIF) submitted a comment letter to the Basel Committee on Banking Supervision (BCBS) in response to a request for comment on the consultative document ‘Disclosure of climate-related financial risks.’ The International Swaps and Derivatives Association (ISDA) co-signed the comment letter.

In the comment letter, the IIF and ISDA encourage the BCBS to re-evaluate whether the proposed disclosure standards align with the primary objectives of Pillar 3 disclosure, and to publish a detailed summary of this assessment in tandem with a future consultation on revised proposals. The overarching comments can be summarized as follows:

• The disclosures proposed in the consultation are not consistent with the stated objectives of Pillar 3 disclosure.
• The proposed Pillar 3 standards are not consistent with the BCBS 2021 Climate Principles. Before imposing significant new Pillar 3 disclosure requirements, the BCBS should make clear how it is viewing this disclosure as a driver of the traditional risk types with respect to capital adequacy.
• We would also encourage the BCBS to carefully consider which information would be appropriate for public disclosure to market participants in the context of Pillar 3 prudential objectives versus which information may be useful only to meet supervisory objectives.
• The proposed quantitative disclosure requirements are not tied to Pillar 3 objectives, do not provide key information relating to a bank’s regulatory capital and risk exposures, and treat climate risk as a standalone risk type rather than a risk driver. For transition risk, the proposals largely hinge on financed and facilitated emissions disclosure; however, aggregate portfolio[1]level financed and facilitated emissions metrics are not direct measures of transition risk[1]driven financial risk to a bank. 
• IIF members find the proposed detailed qualitative disclosures, particularly those regarding a bank’s climate strategy, concerning in the context of Pillar 3 as it is not clear how certain proposed elements would be useful for market discipline with respect to a bank’s capital adequacy and risk exposures.
• More broadly, the BCBS should not seek to duplicate corporate disclosure requirements in a Pillar 3 context.
• The proposed disclosure will not achieve the BCBS’s comparability objectives for Pillar 3 given ongoing challenges around data availability and quality, varying methodological approaches and widespread use of proxies and estimates.
• Finally, IIF members hope that supervisors across the world will align on any final BCBS Pillar 3 tables and templates, accounting for any national discretions which are embedded in such standards. 

The comment letter includes detailed feedback on the BCBS proposed disclosure tables and templates.