Quarles Urges Global Approach on Climate-Related Financial Risk

(Bloomberg) -- Federal Reserve Vice Chair for Supervision Randal Quarles is calling for an internationally coordinated approach to understanding and monitoring climate-related financial risks.

Speaking on the sidelines of a Group of 20 Finance Ministers meeting in Venice on Sunday in his capacity as chair of the Financial Stability Board, Quarles said disclosures and data would be essential.

“Globally consistent, comparable, and reliable disclosures, as well as a broader set of high-quality, relevant data, together, can provide the basis to assess climate-related financial risks,” he told the Venice International Conference on Climate Change.

The FSB last week published a roadmap for tackling some of the key challenges in identifying and managing climate risk, notably the availability of data on emissions by companies and adapting to scenarios for how the environmental shift could play out.

Financial firms could face losses on loans and insurance contracts if extreme weather damages factories or polluting companies go out of business in the transition to a cleaner economy. Yet more than five years after political leaders agreed to limit global warming, banks and insurers still don’t face consistent rules.

Regulators in jurisdictions like Europe and the U.S. are also divided on whether banks should be prodded to steer credit away from carbon-intensive industries toward green companies and projects. The FSB’s roadmap is focused on managing risks rather than supporting the transition.

“The Climate Roadmap sets the course and promotes consistency through, among other things, building consensus around common principles, best practices, and cross-jurisdictional alignment,” Quarles said, according to the text of his prepared remarks.

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