Letter to Basel Committee on Disclosure of Climate-Related Financial Risks

To The Committee:

The American Bankers Association appreciates the opportunity to comment on the Consultative Document – Disclosure of Climate-Related Financial Risks ("CD"). Within the objective of Pillar 3 of the Basel Committee on Banking Supervision's ("Committee," or BCBS) Framework of International Supervision on capital measurement and capital adequacy (the BCBS Framework), the CD seeks comments on specific proposed qualitative and quantitative disclosure requirements intended to promote a common disclosure baseline for climate-related financial risks across internationally active banks.

Our members consist of lenders, investment bankers, asset managers, investment analysts and custodians and, consequently, bring perspectives from a wide range of stakeholders of all sizes. We strongly support the BCBS Framework on capital adequacy and, in particular, the objective of Pillar 3 within the BCBS Framework, which is to complement the minimum capital requirements (Pillar 1) and the supervisory review process (Pillar 2) with market discipline through supplemental disclosure. We also support the Committee's "Principles for effective management and supervision of climate-related financial risks," (2022 Principles) and the BCBS report "Climate-related risk drivers and their transmission channels," (2021 Risk Driver Report) which conclude that climate-related risks are drivers of the traditional banking risks, but are not separate risks themselves.

Summary

With this in mind, we express significant concerns related to key elements of the CD and urge the Committee to work with banking institutions to assess and then propose alternative disclosures that are meaningful within the context of the stated Pillar 3 objectives and overall BCBS framework. We believe the proposed disclosures in the CD potentially compromise both the integrity of the BCBS Framework objectives, which are specifically targeted to capital adequacy and related risk exposure, and the Pillar 3 principles, which address banking risks and not risk drivers. As currently drafted, the proposed disclosures effectively misrepresent climate-related information as relevant to banks' financial risk exposures and capital adequacy.

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