On Wednesday, a global watchdog suggested that banks release comprehensive data about the effects of climate change on their operations beginning in January 2026. This would enable investors and regulators to assess the risk management practises of the banks.

In order to ensure that banks have adequate capital to stay stable and to facilitate investor comparison of climate exposures across institutions, the Basel Committee of banking regulators from the G20 and other nations advocated that banks disclose information relating to climate change.

The watchdog, which draughts high-level guidelines that its members agree to implement in national handbooks, stated that these kinds of revelations can hasten the availability of climate-related data, which is a dynamic field with inconsistent coverage in certain areas.

“For this reason, the committee aims to incorporate a reasonable level of flexibility into a future framework,” the watchdog said in a statement.

The committee would determine which disclosures should be required and which might be left up to the national financial regulators’ discretion based on input from the public consultation on the suggestions.

In addition to the more general corporate disclosures that have been approved globally by the International Sustainability Standards Board, the proposals offer more thorough climate-related disclosures specific to the banking industry.

It is uncertain how Basel’s disclosures would integrate with the corporate climate declarations that the European Union has finalised, and not all nations would implement ISSB reports.

The Securities and Exchange Commission’s new U.S. corporate climate reports are encountering strong opposition from businesses that wish to omit the so-called Scope 3 greenhouse gas emissions that come from their clients.

In addition to Scope 1, which covers direct emissions by banks, and Scope 2, which covers indirect emissions from energy purchases—such as those made for heating or cooling buildings—the proposed Basel framework also includes Scope 3.

“Financed emissions commonly refer to the greenhouse gas (GHG) emissions associated, in the case of banks, with loans and investments, and that are part of their Scope 3 emissions,” the watchdog said. “For banks, financed emissions are often the most significant part of their total GHG emissions.”

The committee acknowledged that banks would encounter difficulties in getting information from their counterparties.

(Adapted from ThePrint.in)