City of London calls for UK and US cooperation on climate data

In order to assess firms’ preparedness and impact on global climate change, financial services regulators have established various climate-related regulations. Current regulation varies from country to country and is heavily reliant on disclosures. Divergence in the implementation of climate-related regulation poses risks to financial services firms, while failing to provide policymakers and the public with data that help inform climate policy.

The issue areas surrounding climate-related financial services regulation can be broken down into three separate issue areas:

  • Lack of data Data provides the basis for risk assessments, establishment of metrics, and the information included in disclosures.
  • Lack of standardisation Standardisation is needed to ensure that the information provided and collected is useful and comparable across jurisdictions.
  • Lack of guidance Yet without guidance, firms will struggle to meet the regulatory requirements placed on them and leave policymakers without the information needed to make accurate decisions.The UK and US should collaborate to ensure that climate data is reliable, comparable, and verifiable. Regulators should create a model for data collection, explore public-private sector collaboration, and develop common positions and guidance on alternative data sources and reporting standards.

Data will be the building block of future climate regulation. It will inform regulators, firms, and individual financial choices. Firms require data to assess climate-related risks. Climate-related data, however, remains a relatively “new” concept.

Collecting and accessing this data presents a series of challenges to financial and professional services (FPS) firms. At present, there is no one central source of climate data. Each existing source differs and even the “best” data may differ greatly depending on its origins. As such, FPS firms and regulators face significant current data gaps. UK and US regulators and policymakers have an opportunity to collaborate towards ensuring climate data is available, comparable and verifiable.

  • Data, direction, dialogue

The UK and US should collaborate to:

  • ensure that climate data is reliable, comparable, and verifiable. Regulators should create a model for data collection, explore public-private sector collaboration, and develop common positions and guidance on alternative data sources and reporting standards
  • develop standardized climate-related FPS disclosure frameworks. This includes incorporation of TCFD (Task Force on Climate-related Financial Disclosures) reporting requirements, exploring appropriate potential future verification mechanisms, and company guidance
  • establish comparable metrics, scenarios, and classification which are appropriately linked to disclosures
  • develop risk assessment mechanisms and work towards establishing a single simplified assessment. UK and US cooperation should seek to develop better guidance around ‘materiality’

The UK and US should advocate urgently for maximum collaboration in the development of globally consistent standards which leverage existing structures. This should be supported by substantive industry engagement maximising UK G7, G20 and COP26 leadership. Bilaterally, the US and UK should coordinate through the US-UK Financial Regulatory Working Group.

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