Weekly roundup: mandatory climate disclosures and new green taxonomy

Canada’s mandatory climate disclosures for banks and insurers, Colombia’s new green taxonomy, Malaysia’s financial exposure to nature-related risk, and more from this week in green central banking.

Canada introduces mandatory climate disclosures

Canada’s financial regulator will require financial institutions to publish climate-related financial disclosures, according to the Canadian government’s latest budget published last week.

The Office of the Superintendent of Financial Institutions (OSFI) “will require financial institutions to publish climate disclosures aligned with the [Taskforce on Climate-related Disclosures] framework” starting in 2024 and using a “phased approach”. The OSFI will consult with financial institutions on the disclosure guidelines during the remainder of 2022.

The new requirements will initially apply only to federally regulated banks, insurance companies and other financial institutions, but the government also intends to move forward with mandatory climate-related risk disclosure for federally regulated pension plans. The budget also includes plans for $5bn in sovereign green bond issuance over the next year.

Colombia launches green taxonomy

Colombia has developed a green taxonomy to help market actors identify and evaluate investments that help meet the country’s climate and environmental objectives.

Launched by President Ivan Duque during a visit to the New York Stock Exchange, the taxonomy outlines seven sectors, assets and economic activities that contribute to climate mitigation, along with three sectors of land use responsible for 59% of Colombia’s greenhouse gas emissions.

Colombia is the first country in Latin America to launch its own green taxonomy, and was supported in the development by the International Finance Corporation (IFC) and other international organisations.

“The aim was to bring the EU taxonomy to a local context by either dividing a number of activities that were very similar to the EU but also developing some additional details that were fit for the country,” said Marcela Ponce, the head of the IFC’s climate finance programme for Latin America and the Caribbean, who worked on the project.

BNM governor warns of biodiversity collapse

The governor of Bank Negara Malaysia (BNM) has warned that our economy is fundamentally embedded in a web of natural systems that provide, support, maintain and regulate our activities, and the collapse of these systems could pose a serious threat to society and the economy.

Speaking at the launch of a major report on nature-related financial risks in Malaysia, Nor Shamsiah binti Mohd Yunus said climate and nature-related risks both affect and are affected by the actions of financial institutions.

The joint study by BNM and the World Bank assessed the exposure of Malaysian banks to sectors and regions highly vulnerable to nature-related risks. It found that 54% of the commercial loan portfolios analysed are exposed to sectors highly dependent on ecosystem services, with 87% exposed to sectors that strongly and negatively impact these services.

“The scientific community continues to issue the ‘code red for humanity,’ and with recent events, including the pandemic, floods and bushfires, the message could not be clearer,” said Nor Shamsiah. “Ecosystem and planetary health matters to economic and financial stability.”

Asean central bank governors welcome sustainable finance measures

Finance ministers and central bank governors from the 10 member states of the Association of Southeast Asian Nations (Asean) have welcomed a range of sustainable finance initiatives underway across the region.

In a joint statement released following an online meeting, the group noted progress on a sustainable finance taxonomy for the bloc and said that stakeholder consultations will begin soon. It also noted “significant progress” in implementing the recommendations of the Roadmap for ASEAN Sustainable Capital Markets, which include corporate sustainability disclosures, fund standards, and environmental, social and governance indices.

The statement also acknowledged progress in building capacity for sustainable finance, including work on a “learning roadmap” and curriculum for Asean central banks and financial regulators. Work is also underway on developing a ‘green map’ to encourage coordinated development of sustainable finance in the region across banking, insurance, capital market and ancillary services.