Posted on 29 April 2021
New Sustainable Financial Regulations and Central Bank Activities (‘SUSREG’) Framework will help central banks and financial regulators create a greener financial system
- Central banks, financial regulators and supervisors have a critical role to play in channeling financial flows towards sustainable activities; many are starting to take concrete action.
- New SUSREG framework provides practical guidance for these institutions to integrate climate and environmental considerations, in line with their mandates, and sets the basis for future assessments and progress tracking.
WWF today launches a new framework
– Sustainable Financial Regulations and Central Bank Activities (SUSREG) – to support central banks, financial regulators and supervisors in enhancing the financial sector’s stability and resilience to climate-related and broader environmental and social risks, while enabling the mobilisation of capital for the transition to a low-carbon, resilient and sustainable economy.
Developed as part of WWF’s Greening Financial Regulation Initiative
, the SUSREG framework will be used to assess the extent to which climate-related, environmental and social issues are being integrated in key aspects of financial regulations, supervisory expectations and monetary policy in 40 countries, covering most members and observers of the Basel Committee on Banking Supervision
"The time to act is now. COVID-19 has demonstrated the human and economic cost of our broken relationship with nature. As nations prepare for international negotiations on climate and biodiversity, 2021 marks the start of a critical decade for reversing nature loss. With the launch of the SUSREG framework and tracker, WWF is scaling up its work with central banks and financial supervisors who have a critical role to play in the transition to a more sustainable and resilient financial system that benefits people and nature." Margaret Kuhlow
, Global Finance Practice Leader, WWF International.
The framework builds on three main pillars, the first of which focuses on factoring climate, environmental and social considerations into micro-prudential and macro-prudential supervision, with an initial focus on the banking sector.
The second pillar covers various measures that central banks can take to address climate, environmental and social risks through various monetary policy measures, as well as to better understand and manage the exposure of their own portfolios to these risks.
The third pillar covers key measures - typically outside the remit of central banks or financial supervisors, but necessary to enable the financial sector to fully support the transition to a sustainable economy, for instance through the development of science-based taxonomies for sustainable and unsustainable activities.
Following a round of discussions with central banks, banking regulators and supervisors in the countries covered, WWF will publish its assessment results on the online ‘SUSREG Tracker’
platform, to be made available in the coming months.
Regularly updated to reflect ongoing developments, this platform will facilitate the sharing of good practices and comparison between countries, as well as highlight areas where additional efforts are required. This independent assessment will be complemented by an annual reporting on progress and a focus on best practices.
By providing a consistent and detailed assessment of measures taken and progress made by financial supervisors and central banks in key countries, the SUSREG framework and associated online platform would also benefit international financial standard-setters (such as the BCBS), initiatives such as the Network for Greening the Financial System (NGFS) as well as the academic community, think-tanks and non-governmental organisations.
More on the Greening Financial Regulation Initiative
The COVID-19 pandemic, despite its unprecedented human and economic cost, could well be dwarfed by future compounding crises. By exacerbating each other, climate change and nature loss are bringing our ecosystems dangerously close to irreversible tipping points. In light of the accelerating twin climate and environmental crises, it is now more urgent than ever to fully mobilize the financial sector to enable and accelerate the transition towards a low-carbon, resilient and sustainable economy.
Over the past few years, central banks and financial supervisors have become increasingly aware that climate-related and environmental risks have significant financial impacts, and are a threat to financial stability.
Further to that, the Network for Greening the Financial System
(NGFS) has grown to a global network of 89 members and 13 observers, and is a key conduit for the development and sharing of methodologies and good practices to address climate-related and environmental risks in the financial system. An increasing number of central banks and financial supervisors worldwide are issuing new guidelines for financial institutions to better account for these risks, and are embarking on ambitious climate stress-testing exercises.
However, despite this positive momentum, much more work is needed for the financial sector to fully internalise climate and environmental risks.
Recognising the growing importance of regulations in creating transformational change in the financial sector, WWF has recently launched the Greening Financial Regulation initiative. Through its global reach as an international science-based organisation, WWF aims to deepen its work with financial regulators, supervisors and central banks, advocating for the urgent need to fully integrate climate-related and environmental risks into their mandates and operations.
With an initial focus on banking supervision, the SUSREG framework will be gradually expanded to cover other key parts of the financial system, such as insurance, capital markets and asset management.
For more information on WWF’s Greening Financial Regulation Initiative and on the SUSREG framework and online tracker, please refer to the SUSREG report, or visit www.susreg.org
For media requests, please contact: Hazel Xu, +65 9452 6803, email@example.com, WWF-Singapore.