International organization tasked with addressing climate change temporarily halts its efforts due to disagreements among member nations at the G20 summit.
The Financial Stability Board (FSB), an international body that monitors and makes recommendations about the global financial system, has paused the integration of climate change policy initiatives into its supervisory and regulatory work. This development, according to Julia Symon, head of research and advocacy at Finance Watch, indicates a deviation from the correct course in addressing climate risk.
Earlier this year, the FSB released a forward-looking framework for assessing climate-related vulnerabilities. The work on transition plans is now planned to be carried forward by the Network for Greening the Financial System (NGFS), which does not have a formal mandate as a standard-setter.
The FSB's decision to pause comes amidst geopolitical tensions and resistance from certain member countries. For instance, within the G20, countries like Austria have shown resistance to certain climate policy initiatives, as reflected in Austria's legal challenge against the EU taxonomy classification of nuclear and gas energy as sustainable investments. This indicates that Austria is among those opposing the integration of some climate measures into financial regulatory frameworks like those overseen by the FSB.
The pause also highlights the limits of global cooperation on climate-related issues. Julia Symon states that the limitations of global cooperation initiatives are evident in the FSB's retreat, as climate risk is not cyclical but cumulative and irreversible. This means that addressing climate risk requires long-term, consistent action, which may be challenging to achieve in a global context with diverse political agendas.
The FSB's report focuses on physical risks and insurance coverage, not on macroprudential tools. This suggests that the FSB's approach to climate-related financial risks is limited in scope, which could exacerbate the risks posed by climate change to the global financial system.
Discussions during an FSB meeting became heated after the US Treasury's interim undersecretary for international affairs stated that climate should only be a focus if there's proof of imminent financial risk. This stance, according to Symon, underscores the need for more proactive and preventive measures to address climate risk.
The FSB will only consider potential climate-related projects yearly and make determinations about what projects, if any, it will undertake. Some FSB members feel there is a need for more work on climate-related risks, while others believe the work completed to date is sufficient. The FSB's report on its medium-term approach to climate-related financial risks reveals a wide range of views among members regarding how to approach such risks.
Potential initiatives could include information sharing, vulnerability analysis, and supervisory and regulatory work. The FSB's retreat, therefore, raises questions about the effectiveness of global cooperation in addressing climate-related financial risks and the need for more concerted and proactive efforts to mitigate these risks.
This page was last updated on July 18, 2025. The FSB's decision to pause the integration of climate change policy initiatives into its supervisory and regulatory work is a significant development that underscores the challenges of global cooperation on climate-related issues. As the impacts of climate change continue to unfold, it is crucial for the FSB and other international bodies to take a more proactive and preventive approach to addressing climate-related financial risks.
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