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The Financial Stability Board, which acts as the G20's global financial watchdog, released a new update on how it plans to handle climate-related financial risks. This new roadmap builds on work started in 2021 and highlights the need for better coordination and more reliable data sharing among global financial institutions. The report also emphasizes progress made so far in integrating climate risks such as extreme weather and shifting policies into financial supervision and regulation. These efforts include contributions from global banking regulators like the Basel Committee and international standard setters.
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However, despite this progress, the FSB announced it would pause any new climate-related policy development. The reason lies in divisions among member countries. Some argue more action is needed, while others believe that the current body of work is sufficient for now. This disagreement reflects deeper political tensions, especially with the United States stepping away from key working groups focused on understanding how climate change could destabilize financial systems. The FSB’s medium-term plan now focuses on acting as a global coordinator rather than a direct policymaker.
The update also highlighted past achievements, such as the evaluation of transition plans for financial institutions and the release of data to help firms estimate future climate-linked losses. While the FSB will still consider climate topics each year, it has decided not to prioritize them unless necessary through its annual planning process.
One of the biggest developments surrounding the Financial Stability Board's update is the noticeable withdrawal of the United States from multiple climate finance initiatives. The US Treasury Secretary, Scott Bessent, did not attend the G20 finance ministers’ meeting in South Africa, where the report was presented. The absence signals a broader pullback by the US on international efforts to manage climate risks through financial policy.
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This retreat has strained the unity of the G20, which was founded as a forum to support global financial stability. The FSB had hoped to push for a stronger, united approach to climate-related financial risks, particularly as extreme weather events and the energy transition continue to impact global markets. But without firm support from the US and other hesitant members, the group has decided not to pursue additional supervisory or regulatory measures at this time.
The FSB clarified that it would continue to monitor climate-related financial issues and might choose to take action in the future, depending on decisions made during its yearly planning process. Meanwhile, much of the climate-related work will remain in the hands of individual member institutions, many of which are still exploring how nature-related and transition risks could affect financial systems.
Although the FSB has made significant contributions to climate finance understanding such as developing disclosure standards and helping institutions model risks from climate events its decision to pause further policy work reflects a cautious approach in a divided geopolitical climate. The global push to link climate risk to financial stability has not ended, but it now faces major uncertainty heading into the next year when the United States will take over the G20 presidency.
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