Climate transition planning is not yet mature enough for the resultant outputs to be useful for financial stability purposes, the Financial Stability Board (FSB) has indicated.

In a report published today, the FSB said that greater standardisation and adoption of climate transition plans was needed to effectively highlight the climate risks that may threaten financial stability.

The report, The relevance of transition plans for financial stability, examines the relevance of transition plans and planning for financial stability and how they can better serve financial stability authorities.

“It is early days for jurisdictions and financial sector authorities in making concrete use of transition plans from a policy standpoint, also in light of their different mandates and objectives,” the FSB said.

“Transition plans hold potential for enhancing financial stability by providing forward-looking information that can be useful to measure and monitor climate-related risks,” it added.

However, it also said there were currently limitations to the effective use of transition plans for financial stability purposes, such as a lack of assurance about the reliability of the information in them.

In a statement, Satoshi Ikeda, who chaired the FSB group that prepared the report, said: “Because of their forward-looking perspective, transition plans could help improve the monitoring of climate-related financial risks by financial authorities, but more work is needed to enhance their coverage, transparency, reliability and comparability.”

The FSB pointed to the work of the International Sustainability Standards Board (ISSB) as a sign that the needed improvement could be on its way.

Implementation of the ISSB’s inaugural disclosure standards could contribute to disclosure comparability and reliability and thereby enhance the usefulness of transition plans for financial stability, it said.

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