Climate-related risks in financial regulation and supervision in APAC

This UNEP FI policy brief examines how jurisdictions across the Asia Pacific (APAC) region are incorporating climate-related risks into prudential frameworks, finding trends towards integration within micro- and macroprudential regulation and climate-related disclosures.

Among other findings, the report shows that:

• Central bank mandates across the region demonstrate great variety in how explicitly they enable regulators to address risks and impacts of climate change-with many of the 12 jurisdictions included in the analysis explicitly or implicitly addressing climate-related risks in their mandates.
• Each of the jurisdictions has conducted or is conducting climate-focused macroprudential exercises, including climate stress testing and scenario analysis, to assess the potential impacts of climate change on financial institutions and financial system stability.
• Jurisdictions' implementation of microprudential regulation of climate-related financial risks are broadly consistent with the Basel Committee on Banking Supervision's three-pillar framework, with the most progress on Pillar 2, focused on supervisory review, and Pillar 3, with growing emphasis on enhancing transparency through climate-related disclosures. Work under Pillar 1 is at an earlier stage, as authorities and the BCBS continue to assess how climate-related financial risks can be effectively captured within minimum capital requirements, in line with the current evidence base and evolving methodologies.