Basel Committee committed to climate disclosures, despite US pushback

The Federal Reserve and other US regulators will not back a global framework that asks banks to disclose their climate risk, leaving the proposal in limbo, Bloomberg first reported. The news leaves questions over whether the US will lose its leadership position in international climate finance talks or if other countries will need to take the lead.

Under the framework proposed by the Basel Committee on Banking Supervision, banks would be required to report detailed information on the impact that climate change could have, including physical and transition risks. The proposed rules include disclosing scope 1, 2 and 3 emissions. However, these rules have reportedly been watered down.

While not legally binding, Basel rules are often used by central banks and regulators to shape regulations. The Fed, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency are all members of the Basel committee.

On Wednesday, the Basel committee reaffirmed its expectations for the implementation of the accord, known as Basel 3, including a review of the proposals related to climate-related financial risks. It said it expects the work to be finalised in the first half of 2025.

Michael Barr, vice-chair for supervision at the Federal Reserve, told a Congressional hearing on Wednesday that the Fed was still looking at the Basel climate risk proposal under Pillar 3 and had not yet made a decision.

“We’re still looking at the revisions that have been made and considering whether they’re a good fit in the United States or not. That’s the position that all three agencies have taken,” he said.

There is “very little certainty on the US stance” on the Basel process, said Julia Symon, head of research and advocacy at Finance Watch. Work on climate risk disclosures, as well as Basel 3 implementation, has already faced resistance from the US, “which is likely to be even more the case”.

“I think that the work is unlikely to stop completely, it is rather a question of remaining ambition,” Symon said. She urged the EU to uphold international cooperation, especially as the bloc has already pioneered many regulatory initiatives around climate change risk.

Graham Steele, former assistant secretary for financial institutions at the US Department of Treasury, said news that US federal regulators were pushing back against the climate disclosure rules was not surprising but was disappointing.

“The US has been standing in the way of a lot of international progress for some time. It started during the [first] Trump administration but it’s also continued into the Biden administration,” he said.

While the sources revealing the US pushback have remained anonymous, Steele says it has likely come from international counterparts who are unhappy with America’s position, which “signals a real breakdown in these international negotiations”.

But whether Basel will move ahead with its climate disclosure proposals despite US pressure will depend on who Trump picks to lead international agreements. And with Trump’s administration pushing against ESG and climate change efforts, it is possible the US will lose its leadership position on climate change efforts.

While there is a view in the US that America “gets led around by the nose by our foreign counterparts… and let Europeans dictate US financial policy… nothing could be further from the truth,” said Steele.

“The US has often led in these international forums, and we’re actually seceding a leadership opportunity by not participating here on climate change, and we’re losing a leadership position that we have had around financial regulation more broadly, and so it really is a missed opportunity”.

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