The recommendations of the report are meaningful, but also highlight the challenges already included in other reports (by NGFS, ECB, BoE) such as availability of data and the nascent stage of climate risk measurement methodologies and stress tests or scenario analysis.
The recommendations do not take into account the time dimension of the climate risk problem. By the time the supervisors and regulators will have more data and more advanced methods of measurement, climate-related risks will have increased. Our economy and financial system might face major climate-related disruptions due to non-linearities and potential tipping points, which are unique features of climate-related risks compared to the other risk types that regulators and supervisors are used to dealing with. It is therefore questionable whether the proposed recommendations will really allow to “avoid unintended consequences and a less effective transition”, as stated in the interim report.
The shortcomings in the recommendations highlight the need to take a precautionary approach. This should mean holistically and explicitly integrating climate-related risks into existing prudential regulatory frameworks. Impactful actions and coordinated approach between international bodies, national regulators and supervisors are necessary to address the systemic dimension of climate-related risks, since systemic risk can be only reduced by simultaneous combined action of all actors.