The Basel Committee on Banking Supervision has committed to intensifying its efforts to assess and disclose the financial risks posed by climate change, particularly in relation to extreme weather events. At a meeting held on May 12, 2025, the Group of Central Bank Governors and Heads of Supervision (GHOS) reaffirmed its dedication to implementing Basel III reforms and prioritizing climate-related risk analysis within the global banking system.
The committee plans to release a voluntary Pillar 3 disclosure framework, which will guide national regulators on climate-related financial risks. While the framework is non-binding, it is expected to set a global benchmark for transparency in climate risk reporting. The initiative comes at a time when extreme weather events, fueled by climate change, are increasingly seen as major financial risks for the global economy.
“The GHOS tasked the Committee with prioritising its work to analyse the impact of extreme weather events on financial risks,” said the Bank for International Settlements (BIS), which supports the Basel Committee’s efforts. This move underscores the growing recognition of the need for the financial sector to better understand and manage the financial implications of climate-related disasters.
This renewed focus on climate risk comes amid a widening transatlantic divide. While European and UK regulators continue to embed climate risk considerations into financial supervision, U.S. regulators have scaled back their efforts. Under the Trump administration, the U.S. withdrew from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) and has shown signs of rolling back climate-focused initiatives at the Federal Reserve and FDIC.
Despite the resistance in the U.S., the Basel Committee’s influence remains substantial, and analysts expect its push for climate risk disclosures to align more closely with European and British approaches. This divergence could pressure national regulators worldwide, particularly in the face of increasing demands for climate-related financial transparency.
“Analysts say the Basel Committee’s climate risk work is more closely aligned with European and British regulators… than to those in the United States,” said an expert in financial regulations.
The Basel Committee’s new framework, expected to be published later this year, will offer a structured approach to assessing the financial risks linked to climate change. This move follows growing momentum in the European Union and the UK to integrate climate risk management into banking supervision, including the European Central Bank’s focus on climate-related financial risks. The adoption of this global framework could lead to more standardized climate risk reporting, regardless of political differences, and encourage financial markets to place greater emphasis on climate resilience.
As the global financial system grapples with the realities of climate change, the Basel Committee’s actions could play a pivotal role in defining the future of climate risk disclosure in banking and finance.
