2022 SUSREGANNUAL REPORTAN ASSESSMENT OF SUSTAINABLE FINANCIAL
REGULATIONS AND CENTRAL BANK ACTIVITIESAuthors: Adam Ng, Siti Kholifatul Rizkiah, Maud Abdelli
The development of the Sustainable Financial Regulations
and Central Bank Activities (SUSREG) framework has been acollaborative effort. In particular, the authors would like tothank Deloitte Switzerland’s sustainable finance team (Jérôme
Crugnola-Humbert, Kaja Brodtkorb, Antoine Wannier, Greta
Cenotti, Maya Dyuzhakova, Aylin Noorda, Simon Heller, andMarcel Meyer) for their support with the SUSREG initiative.
The authors would like to thank all current and former WWF
colleagues for their contributions at various stages of the project,in particular, Fatin Nabilah Fatah, Ristiyanti Hayu Pertiwi, Pina
Saphira, Avital van Meijeren Karp, Maria Fernanda Contreras delValle, Laurence Picton, Kristina Anguelova, Anders Nordheim,
Edith Verhoestraete, Carolin Carella, Jochen Krimphoff, Hannes
Peinl, Ivo Mugglin, Lennys Rivera, Magnus Emfel, Anshul Mishra,
Rizkiasari Yudawinata, Debora Batista, Maxime Garde, Juan
Barriga, Mariann Breu, Fungai Musana, Christine Mwangi, andthose who wished to remain anonymous.
WWF is also very grateful to the Australian Prudential Regulation
Authority, Banco Central Do Brasil, Bank Negara Malaysia,
Danmarks Nationalbank, De Nederlandsche Bank, Deutsche
Bundesbank, Hong Kong Monetary Authority, and Reserve Bankof India for providing insights into their current and upcoming
initiatives, to be found in the “interview” section of this report.
WWF would like to thank the individual organisations andinstitutions who contributed to make the SUSREG framework
and assessment more robust and the results more reliable, by
responding to the initial consultation and providing feedback on
the assessment results.
This project is part of the International Climate Initiative (IKI). The
Federal Ministry for the Environment, Nature Conservation and
Nuclear Safety and Consumer Protection supports this initiativeon the basis of a decision adopted by the German Bundestag.
Supported by:This report is part of:
WWF Greening Financial Regulation Initiative (https://wwf.panda.
org/discover/our_focus/finance/greening_financial_regulation/)
Asia Sustainable Finance Initiative (www.asfi.asia)
Production and design:

CONTENTS

Sweeta Patel (www.thecornershop.me)
Co-published in December 2022 by WWF - World Wide Fundfor Nature, Switzerland and WWF - World Wide Fund for Nature,
Singapore.
Any reproduction in full or part must mention the title and credit
the above-mentioned publisher as the copyright owners.
Cover Photo:©Shutterstock – Sylvie Corriveau

FOREWORD
THIRTEEN RECOMMENDATIONS

WWF is one of the world’s most respected and experienced
conservation organisations, with over 5 million supporters
and a global network active in more than 100 countries.
WWF’s mission is to stop the degradation of the planet’s naturalenvironment and to build a future in which people live in harmony
with nature. WWF has worked with the finance sector for morethan a decade via innovative collaborations that seek to integrate
ESG risks and opportunities into mainstream finance, to redirect
financial flows in support of the global sustainable development
agenda. Through its Greening Financial Regulation Initiative(GFRI), WWF engages specifically with central banks, financial
supervisors as well as insurance regulators on the need to fully
integrate climate, environmental and social risks into mandates
and operations. The GFRI tracks regularly how central banks
and supervisors are making progress via its SUSREG tool. It also
undertakes research, capitalising on in-house expertise andexternal partners, and offers targeted assistance, trainings,
and workshops to individual financial supervisors, central banks,and policymakers using scientifically based data, tools, andmethodologies. For more information visit our website at
panda.org/gfr or contact our secretariat through gfr@wwf.ch

INTRODUCTION
THE SUSREG FRAMEWORKA GUIDE TO THIS REPORTBANKING FINDINGSINSURANCE FINDINGSCONCLUSION
NEXT STEPSANNEXES

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Copyright © 2022 WWF-Switzerland and WWF-World Wide Fundfor Nature (Singapore) Limited© Shutterstock – blueeyes

1FOREWORDWE OWE IT TO OURSELVES AND TO THE NEXT
GENERATION TO CONSERVE THE ENVIRONMENT
SO THAT WE CAN BEQUEATH OUR CHILDREN ASUSTAINABLE WORLD THAT BENEFITS ALL.
PROF WANGARI MAATHAI | NOBEL PEACE PRIZE WINNER© Shutterstock – Mariia Romanyk

ELIZABETH MARUMA MREMATNFD CO-CHAIRDAVID CRAIG
TNFD CO-CHAIR

Finance ministers, central bank governors and financial
supervisors are also custodians of our future. After all, theirmandates include regulating the financial system to ensurethat the economy both meets the needs of people and society
and secures a sustainable future for us all.
Nature is declining faster than at any time in human history.
If businesses, investors and policymakers don’t take accountof nature loss now, the risks will grow more extreme.
There is recent and rapidly growing recognition amongst
financial policymakers, that nature-related risks associatedwith today’s unprecedented rate of nature erosion, and thereliance of the global economy on nature, threatens financial
and monetary stability.
We must transform our relationship with nature and securea future where humans live “in harmony with nature”.
This is the vision statement of the draft Global Biodiversity
Framework (GBF) which has been further negotiated andadopted under the auspices of the Convention on Biological
Diversity (CBD) at COP15 in December 2022. In this vision,
investment will not only incentivise activities and businesses
that minimize risks and impacts, and generate positive

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outcomes for nature, but also those that enhance ecosystems
and support the resilience of our planet and global society.

than US$10 trillion in additional opportunities each year
and support some 350 million jobs by 2030.1

This year, at COP 15, the stakes are higher than ever —we have a once-in-a-lifetime chance to transform ourrelationship with nature. We must make the most of thismoment to safeguard our future. Just as the Paris Agreementof 2015 created a global framework for climate action, theGBF must trigger a wave of awareness and action for nature
positive outcomes on a global scale.

The Taskforce on Nature-related Disclosures (TNFD)
is a market-led, science based, voluntary initiative,
working to bring clarity and methodological guidance forassessing nature-related dependencies and impacts, risks
and opportunities and disclosing against these to ensuretransparency and accountability for change.

For financial institutions and businesses, the GBF will marka turning-point in the regulatory landscape, emphasizing theimportance of policymaking in mainstreaming biodiversity
in investment decision-making, and the transformation ofmarket incentives towards the alignment of financial flows.
This will also set the stage for disclosure requirements
by organisations on their exposure to nature-related risks
and impacts.
Taking decisive action to bend the curve on nature loss,
is also the source of potentially very significant new green
economy opportunities for business and finance. Shifting
to nature-positive business models will generate more

The TNFD’s mission is to develop and deliver a risk
management and disclosure framework for organisations
to report and act on evolving nature-related risks andopportunities, with the ultimate aim of supporting a shift
in global financial flows away from nature-negative outcomes
and toward nature-positive outcomes. Having released thethird iteration of its draft framework in November 2022,
the TNFD will continue its iterative approach based onmarket testing to help to maximise the relevance, usability
and effectiveness for the TNFD’s final recommendations
which will be published in September 2023. The pilot testingunderway will ensure the framework is practical, adaptable
and implementable across all organisations and financial
institutions, north or south, large or small.

The two crises of climate change and nature loss are tightlyinterconnected. Businesses must pursue and accelerate
their action on climate. They must also bring nature into
the equation. The world’s race towards net zero emissions
will only succeed if they race equally fast towards naturepositivity. The climate crisis cannot be stopped without
addressing the degradation and loss of nature and biodiversity
and nature offers critical tools in both mitigation andadaption of climate change impacts.
Policymakers, financial supervisors, businesses and financialorganisations must work together to support the market shiftneeded to address the nature crisis.
WWF’s Sustainable Financial Regulations and Central Bank
Activities (SUSREG) tracker and report come at a crucial time,
when policymakers and financial supervisory entities need tobuild policies, set new requirements, and track progress acrosstheir main mandates and activities, to address the single twincrisis of climate change and nature loss. For this to happen,
they should embrace the future and transform the financial
system, towards a nature-positive economy.

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FOREWORD
DR. MA JUN
CO-CHAIR OF THE NGFS/INSPIRE STUDY GROUP ON BIODIVERSITY,PRESIDENT OF INSTITUTE OF FINANCE AND SUSTAINABILITY

Mother Earth provides an abundance of natural resources andecosystem services that allow us to live and thrive. Globally,
US$ 44 trillion of GDP comes from sectors that are highly andmoderately dependent on nature, accounting for more than
50% of the world’s total GDP. However, in the last ten years,
the risk of biodiversity loss has been growing at an alarming
pace, as is the climate crisis, and it has growing implications
for the stability of the global economy and financial system.
Financial institutions are particularly exposed to both risks
and opportunities in the transition to a nature-positive andzero-carbon future and are uniquely positioned to steer the
direction of financial resource allocation that would shape
the sustainability of the global economy.
In March of 2022, the joint study group of Biodiversity and
Financial Stability initiated by the NGFS and INSPIRE,
co-chaired by Nick Robin of LSE and myself, concluded that“biodiversity loss is a source of financial risk and addressing
this risk is part of central banks’ and regulators’ mandate.”
This message is now becoming a global consensus as it isendorsed by the NGFS, which represents over 100 central
banks and financial supervisors. This is the first time that
central banks and supervisory authorities have recognized thepotential for biodiversity loss to threaten financial stability.
I believe that in the coming few years, many central banks andsupervisors will begin to assess the impact of biodiversity loss
on financial stability, require financial institutions to disclose theimpact of their investments on nature and biodiversity, include
nature-positive activities into “green finance taxonomies”,
and provide incentives for nature-positive investments.

As with climate change, there has been increasing policy
focus on the role of the financial system in contributing toprotect nature and biodiversity. The Kunming Declaration,delivered at the first phase of CBD COP15, referred to theneed to “transform economic and financial systems” and“align all financial flows in support of the conservation andsustainable use of biodiversity”. The G20 Sustainable FinanceRoadmap also highlighted several priorities, including the
integration of nature and biodiversity in future work ofsustainable finance.
I am pleased that the 2022 SUSREG annual reportshows that many central banks, financial regulators, andsupervisors around the world are beginning to take action
to address financial risks arising from biodiversity loss.
Most importantly, it helps us provide a good overview
on good practices, current gaps and further actions expected
through examining the measures and policy progress taken
by respective countries covering 44 jurisdictions globally.
The launch of the 2022 SUSREG comes at a particularly
important time leading up to the second phase of COP15
in December where 196 countries will introduce a new
global biodiversity framework for the protection of nature.
To respond to the new goals through 2030, central banks,financial regulators, and financial institutions should keep
track of these developments, assess their implications forfinancial systems in their jurisdictions, engage with thecorresponding multilateral initiatives, and speed up theirown actions.

© Shutterstock – Veres Szilard

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THIRTEEN RECOMMENDATIONSTO CONSIDER IN THE SHORT TERM(MINIMUM REQUIREMENT FOR CENTRAL BANKS AND FINANCIAL SUPERVISORS)SUPERVISION (BANKING AND INSURANCE)
robust and mandatory disclosure of climate- and nature-related risks and opportunities:
06. Promote
Supervisors should require financial institutions to include information about their E&S strategy and its

implementation in their annual report, in both quantitative and qualitative terms, either directly or by referencing
other separate publications. The reporting on the strategy’s progress needs to include information on potential
non-achievement of related targets and planned activities to realign, set, and/or adapt their strategy. In addition,
supervisors should actively support initiatives to address E&S data availability and quality issues, including promoting
open-source solutions. This must be supported by concrete recommendations or actions from the supervisors
and not remain just a general statement of encouragement. Mandatory disclosure and robust assurance based oninternationally-recognised frameworks, such as the Task Force on Climate-Related Financial Disclosures (TCFD) and
TNFD, would enhance data quality and availability.

targets and taxonomy alignment: Supervisors should expect financial institutions to set climate science-based targets
07. Setand keep up to date with the latest climate science, to align their portfolios with the objectives of the Paris Agreement, as

INTEGRATION OF ENVIRONMENTAL AND SOCIAL RISKS ANDOPPORTUNITIES IN THE OVERALL STRATEGY AND ROADMAP
transition plans to a low-carbon, nature-positive economy: Central banks and financial supervisors must
01. Publish
lead by example and provide necessary clarity and forward guidance to financial markets actors by publishing theirown clear and detailed transition plan (with clear quantifiable climate and biodiversity goals for 2025, 2030, and 2050
covering all central banking, financial regulation, and supervision activities). This should be reinforced with measuresfor contributing to a net-zero and nature-positive financial sector in line with its mandate. Central banks and financial
supervisors must request all regulated financial institutions to publish yearly, detailed net-zero and nature-relatedtransition plans regarding all their investment, lending, and underwriting practices.

02.

Officially set science-based, climate- and environmental-related nominal anchor: Central banks should officiallydefine a 1.5°C or well below 2°C nominal anchor as part of their objectives, underpinned by a plan of reaching net-zero
CO2 emissions of the economy by 2050. Central banks should also define a ‘full biodiversity recovery by 2050’ nominal
anchor as part of their objectives which is underpinned by a plan to reach a nature-positive economy by 2030.

nature-related risks and opportunities: Central banks should consider climate and nature as a single twin
03. Integrate
crisis and ensure their monetary policy implementation does not contribute to climate change and nature loss. Financial
supervisors should stop the financial contribution to climate change and nature loss using all available tools at microand macro-levels. Loss of trees and other vegetation is a cause of various phenomena exacerbating climate change andnature loss (loss of habitats, increased greenhouse gas emissions (GHG), disruption of the water cycle, and soil erosion)
but also putting our economies and health at risk. Central banks and financial supervisors should take the necessary
steps to stop deforestation, ensuring they are not participating in it and asking financial institutions whether and how
they integrate deforestation and wider habitat conversion issues in their decision-making, risk management processes
and policies, with minimum requirements. Financial institutions should not be associated, at the very least, with any
type of business relationship with illegal deforestation, conversion of Key Biodiversity Areas, Protected Areas, and World
Heritage Sites. Central banks and supervisors should further develop a risk-based classification framework for sectors
and assets exposed to biodiversity loss, which may enhance the data required for stress-testing and scenario analyses
and reallocate capital flows from biodiversity-negative to -positive projects. Lastly, supervisors should mandate financial
institutions to report their management of nature-related risk and opportunity based on the Taskforce on Naturerelated Financial Disclosures (TNFD) framework.

SUPERVISION (BANKING AND INSURANCE)
clear and minimum supervisory E&S expectations and reflect them in supervisory requirements:
04. SetFinancial supervisors should plan, set, and publicly declare minimum expectations to send the necessary signals

to financial markets. Supervisors and regulators should set minimum capital requirements or capital add-ons (andliquidity ratios for banks) for financial institutions to incorporate E&S considerations, through a differentiated riskbased approach. Supervisors should use all supervisory tools (concentration limits, calibration of capital, liquidity
requirements, etc.) to reflect the risks embedded in banks’ lending to and insurers’ underwriting of companies
included in the ‘always environmentally harmful filter list’.2

full use of macro-prudential tools to prevent systemic risks triggered by climate change and nature loss:
05. Make
Supervisors should issue prudential rules to limit the exposure of financial institutions for certain activities, to preventand protect against the build-up of systemic risk related to E&S. Specific capital requirements for banks and insurers toincorporate a macro-prudential buffer for systemic E&S risks should be considered to foster long-term financial stability.

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well as set science-based targets at the portfolio level to mitigate negative environmental impacts beyond climate. Banks
should be expected to publicly disclose the share of their total lending portfolio (and insurers their total underwriting
portfolio) that is aligned with existing classification systems for sustainable or unsustainable activities (taxonomies).

scenario analysis and assess tipping points: Financial institutions should continually assess and manage
08. Apply
their exposure to material E&S risks, by using science-based, forward-looking scenario analysis and stress testing,over the short-, medium- and long-term. Such scenarios should also integrate likely or probable physical tipping
points, such as the melting of the Greenland ice cap or the disintegration of the West Antarctic ice sheet.

SUPERVISION (INSURANCE-SPECIFIC ISSUES)
consistency between assets and liabilities: In many cases, insurance supervision concerning E&S issues
09. Applyis more developed for the investment activities of insurance companies than for their traditional insurance activities.
Consistent supervisory expectations should be developed and enforced for both sides of insurers’ balance sheets
to ensure, for example, that insurers do not keep underwriting risks for harmful activities that they have started
phasing out of their asset portfolios.

the protection gap: As climate change, biodiversity collapse, or A.I.-enabled underwriting develop, entire
10. Reduce
sections of the general population (often the most vulnerable) may lose access to insurance as premiums increaseor covers are withdrawn. Governments and insurance supervisors should decisively act to reduce this protection
gap through a combination of Public-Private Partnerships, insurance mandates, product innovation, and capitalor tax incentives.

the role of the reinsurance system: The equivalent for insurers of central banks is the mostly private
11. Understandand decentralised network of reinsurance companies. These reinsurers are often the ultimate underwriters of several
E&S risks (such as natural catastrophes). Insurance supervisors should examine this specific role of the reinsurance
system when it comes to E&S issues and, where relevant, leverage reinsurers’ expert knowledge of these risks.

CENTRAL BANKING AND MONETARY POLICY
E&S in central bank’s collateral framework and subsidised loans: Central banks need to make full
12. Integrate
use of their monetary policy toolkit, both to reflect the risks derived from environmental and social issues as wellas to ensure that their actions promote the transition to a low-carbon and more sustainable economy. Central banks’collateral framework should take E&S considerations into account by integrating historical- and forward-looking,quantitative, and qualitative climate- and nature-related (e.g., deforestation and habitat conversion risk) metrics
and social considerations. Central banks should also offer subsidised loans or preferential targeted refinancing
lines based on E&S considerations.

ENABLING ENVIRONMENT
tools such as science-based taxonomies covering both sustainable and unsustainable activities and13. Useefficient carbon pricing: When designed and implemented consistently, these can prove to be powerful levers tocomplement and reinforce other regulatory actions. Financial and non-financial regulators and policymakers should
define and publish disclosure principles and templates for E&S risks and impacts, and make disclosure mandatory forcorporations. They should request annual disclosure of GHG emissions as well as nature-related and social impacts
by corporations and encourage the disclosure of supply chain data.

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INTRODUCTION
Our sustenance comes from nature. Half of our global GDP comes fromsectors reliant on nature (e.g., food, raw materials, pollination, etc.)3 –our economies are embedded in it,4 yet we continue to neglect this connection
with irresponsible development that results in climate and ecosystem
breakdown. The repercussions are massive, not just on the environment
but also to economic, financial, and social stability with the pandemic
giving us a small taste of things to come if we continue at this rate.
At our current pace, the world has only a 50% chanceof achieving the 1.5°C target in the Paris Agreement.5
According to a major study by the Potsdam Institute for
Climate Impact Research,6 the climate catastrophe hasbrought the globe dangerously close to many “disastrous”
tipping points. It demonstrates that five tipping points may
have already been crossed as a result of the 1.1°C global
warming brought on by human activity to date. A recent
United Nations Environment Programme (UNEP) reportmentioned that progress since COP26 in Glasgow has
been tragically insufficient, despite a call for strengthened
Nationally Determined Contributions (NDCs) by 2030.7
Over the next eight years, the world must cut emissions
by unprecedented levels if it is to stay on course to fulfil
the Paris Agreement objective.
Forests play a fundamental role in regulating the climate,
yet in the last 100 years alone, nearly 50% of the world’s
habitable land has been destroyed. Pakistan’s recent floods
were a climate-induced disaster with one-third of the country
under water, displacing over 33 million people and costing
US$ 40 billion in damages. The California drought has
resulted in losses of almost US$ 2 billion and 14,000 jobs.
Globally, up to US$ 24 trillion worth of assets could be
at risk from 2.5°C warming and with dwindling food security,
3 billion people do not have access to a healthy and nutritious
diet. These are not mere numbers; these are human andbiodiverse lives ravaged, homes destroyed, futures ruined.
There is overwhelming evidence that nature loss andclimate change are closely related to financial andeconomic instability8 and low-income countries that are
more reliant on nature’s goods and services stand to lose themost. Melting glaciers and a warmer Earth have led to sea
levels rising at an unprecedented rate, destroying agriculturalland and animal habitats, resulting in more dangerous typhoons
and hurricanes, and displacing portions of the population.9
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As stewards of the financial system, central banks, andfinancial supervisors (CBFS) must take the same brave standof economic intervention as they did in the pandemic andprevious financial crises to treat the single twin crisis ofnature loss and climate change as a financial crisis. This isimperative to assert their mandate of ensuring financial andprice stability, as studies have outlined the connection between
environmental and social (E&S)10 risks and monetary policy.11
Central banks and financial supervisors must play a leadingrole and ensure that other financial institutions follow suit.
With US$ 468.7 trillion in global financial assets,12 thefinancial sector is critical in ensuring the transition towards
a low-carbon economy. It is also in the interest of financial
institutions (FIs) to manage climate and nature-relatedrisks as these risks are financially material to their business.
According to the European Central Bank’s (ECB) economywide climate-stress test, which examined the impact ofclimate change on more than 4 million firms worldwide
and 1,600 euro-area banks, the portfolios most sensitive toclimate risk are 30% more likely to default in 2050 than they
are in 2020 under the ‘hot house world’ scenario, in which
no regulation or policy aimed at limiting climate change isintroduced.13 The ECB also recently supported the European
Commission’s proposal to update the Capital Requirements
Directive to include climate risk, which will compel financial
institutions to urgently manage their environmental risks.14
A study at the Sustainable Finance Lab at Utrecht University
found that just four central bank policies supporting theecological transformation could lead to a global reductionof greenhouse gas (GHG) emissions of 5-12%.15 Whilst green
investment is still three to six times lower than levels neededby 2030 to maintain global temperature increase to below
2°C, sufficient capital and liquidity exist globally to close that
gap and it requires action by governments and communities
to align public sector finance and policies.16

Despite increasing financial disclosures, analyses,
and guidelines relevant to the environmental,social, and governance (ESG) sphere, we needto collectively act sooner and go beyond disclosureby using a precautionary approach to prevent futurerisks. The precautionary approach, as WWF defines it,
is a crisis management framework and mindset for central
banks and financial supervisors which focuses on taking
pre-emptive measures to fight climate change and natureloss proactively and effectively as two sides of the same coin.
It requires that CBFSs apply all necessary instruments ofmonetary policy and financial regulation at their disposal,
and base their decision-making on the worst-case scenarios.17
The priority should be to focus on tilting away from the mostenvironmentally harmful businesses and sectors, as those
represent the greatest risk. For example, financial institutions

exposed to oil and gas are expected to lose US$ 1.7 trillion fromtransition-related market and credit risk even in the case of anearly transition, rising to US$ 2.5 trillion if action is delayed.18
It is late, but not too late. Acting today, pre-emptively
and with full force, will help central banks, regulators,
and supervisors safeguard their ability to fulfil theirprimary mandates into the future. WWF calls on
decision-makers at central banks and financial supervisors
to act fast, be responsible, bold, creative, audacious, and not
to hold back. A sustainable and just transition can provide
new economic opportunities and a lack of it is drastic – theWorld Bank predicts that the loss of important ecosystemservices could cost the global economy $2.7 trillion annuallyby 2030.19 It is financially wiser to take preventive measures
now than to recover later.

To build on this positive momentum and further accelerate the strengthening and harmonisation of sustainable financial
regulations and central bank activities in key financial markets worldwide, WWF launched the Greening Financial
Regulation Initiative (GFRI). Through this initiative, WWF deepens its collaboration with policymakers, central banks,
and financial supervisors, advocating for the urgent need to fully integrate climate, environmental, and social risks into
their mandates and operations—mainly through financial regulation and supervision as well as monetary policy.
This notably entails the provision of targeted support, research, and capacity building to equip institutions with the necessary
tools and knowledge. One pillar of the GFRI consists in showing the status quo and progress made in the integration ofclimate, environmental, and social aspects into central banks’ activities. Building on current good practices and ongoingdevelopments in the central banking and supervisory landscape, WWF GFRI launched the SUSREG framework in 2021. This
year, the SUSREG framework expanded to cover regulations pertaining to the insurance industry.This framework capitalises
on WWF’s experience working with financial sector stakeholders worldwide and benefits from its perspective as a sciencebased organisation. This report is accompanied by an online platform or ‘tracker’ (www.susreg.org), that will display the
results of an assessment against the framework of relevant country- specific sustainable finance regulations and supervisory
expectations for banking and for insurance as well (find out more in our SUSREG launch report for insurance), as well as
central banking activities.

THE SUSREG FRAMEWORK AND THE ASSESSMENT RESULTS CAN BE USED BY:
Central banks, financial regulators and supervisors:
 To strengthen regulatory and supervisory practices
by integrating E&S considerations into financial
regulations (for banking and insurance), guidelines,
and monetary policy operations;

To benchmark themselves against peers in key
markets worldwide and align with best practices.

International financial standard-setters and initiatives:
 To benefit from independent, regularly updated
assessments and annual reporting on progress;To build on the framework to establish roadmaps
for integrating E&S considerations into global financial
regulations and central bank activities;

To benefit from the science-based perspective of WWF
on best practices regarding the integration of climaterelated and E&S risks.

Commercial banks and insurance companies:
 To understand the differences in the regulatory andmonetary policy frameworks between the countries
in which they operate (and those affecting the financial
institutions in their portfolios);To formulate their ESG strategy by taking into
consideration other countries’ best practices in banking
and insurance regulations;

To support and inform their engagement with government
entities and policymakers.

Academics, think-tanks and othernon-governmental organizations: To better understand the differences in the financial
regulations in key countries worldwide;To assess the degree of integration of various E&S
issues in financial regulation and central bank activities,
and track progress.

9THE THREE KEY PILLARS OF THE ASSESSMENT ARE:

THE SUSREG FRAMEWORKThe Sustainable Financial Regulations and Central Bank Activities (SUSREG)
framework and tracker aims to assess the integration of E&S considerations
in financial regulations, supervisory expectations, and monetary policy.
It also aims to provide practical guidance to central banks, financial
regulators and supervisors, contributing to the transition to a net-zero,inature-positive,ii inclusive, resilient and sustainable economy. This year,
the framework covers a wider range of sustainable finance topics pertaining
to the banking and insurance industry.
The SUSREG framework was first launched in April 2021,
assessing banking regulations and supervision, central
banking activities, and aspects contributing to an enabling
environment for sustainable finance (see Figure 1).
The SUSREG assessment has been extended this year
to cover regulations pertaining to the insurance industry,enabling the assessment of progress made by insurance
regulators and supervisors. In this second iteration, a total of
87 indicators were deployed to assess the banking industry,organised around three key pillars (banking supervision,
central banking, and enabling environment) in addition to
83 indicators for the insurance industry, detailed in two key
pillars (insurance supervision and enabling environment).20

Based on an extensive annual global assessment, thissecond SUSREG annual report highlights the extent ofenvironmental and social (E&S) measures that are being
implemented by central banks and financial supervisors,
identifies gaps in implementation, and where resoluteand ambitious action is required. It also highlights goodpractices from selected front-running jurisdictions
which will serve as useful references for central banks,
supervisors, and regulators to accelerate their progress
towards more comprehensive and harmonised practices.

BANKING AND
INSURANCE SUPERVISIONCENTRAL
BANKING

This section assesses the maturity ofsupervisory expectation in using various
tools and measures to ensure both thesafety and soundness of individual
banks, (re)insurance companies and thefinancial system stability, with regards
to climate, environmental, and social
risks. It also includes measures that
regulators and supervisors themselves
can take to show leadership and better
understand these risks and theirimplications for the financial sector.

This section assesses various
measures that central banks
can take to address climate,environmental, and social risks,
in keeping with their key mandatesof ensuring money supply and pricestability. It also includes measuresthat central banks can take to show
leadership and better understandthese risks and their implications.

MAIN
SECTION

BANKING AND INSURANCE SUPERVISIONKEY ROLES& MANDATESSUB-SECTIONS
OF THEFRAMEWORKKEY ROLES& MANDATESSUB-SECTIONS
OF THEFRAMEWORKi. 	Net zero emissions are achieved when anthropogenic emissions of greenhouse gases to the atmosphere are balanced by anthropogenic removals over a specified
period. Where multiple greenhouse gases are involved, the quantification of net zero emissions depends on the climate metric chosen to compare emissions ofdifferent gases (such as global warming potential, global temperature change potential, and others, as well as the chosen time horizon). See https://www.ipcc.ch/sr15/
chapter/glossary/#:~:text=The%20process%20by%20which%20countries,with%20electricity%2C%20industry%20and%20transportii. Nature-positive refers to the WWF and WEF definitions, indicating that there needs to be more nature in 2030 than in 2020, that at least 30 % of land and oceans areprotected, the footprint of our production and consumption is halved by 2030, and that there cannot be any offsetting

10 | SUSREG ANNUAL REPORT 2022

This section assesses the maturityof the environment required thatwould be key for the financial sector
to fully support the transition toa low-carbon, resilient and sustainableeconomy. Some of these measures
may be outside the remit of central
banks or financial supervisors.

FIGURE 1:SUSREG TRACKER FRAMEWORKSAFETY & SOUNDNESS OF BANKS AND INSURERS

FINANCIAL SYSTEMSTABILITYOWN PRACTICES& ADVOCACY

MACRO-PRUDENTIAL
SUPERVISIONLEADERSHIP &INTERNAL
ORGANIZATIONMICRO-PRUDENTIAL SUPERVISION(SUPERVISORY EXPECTATIONS)SCOPE &
IMPLEMENTATIONSTRATEGY &GOVERNANCE

MAIN
SECTION© Shutterstock – Henryp982

ENABLING
ENVIRONMENTPOLICIES &PROCESSESPORTFOLIO RISK
& IMPACTMICRO-PRUDENTIAL
SUPERVISION(RULE-BASED)CENTRAL BANKINGMONEY SUPPLY & PRICE STRATEGYMONETARY POLICY(CONVENTIONAL & UNCONVENTIONAL)DISCLOSURE &TRANSPARENCY

ENABLING ENVIRONMENTOWN PRACTICES & ADVOCACYMEASURES TYPICALLY OUTSIDE THE REMITOF CENTRAL BANKS AND SUPERVISORSLEADERSHIP & INTERNAL ORGANIZATION

E.G., TAXONOMY, CORPORATE DISCLOSURE,CARBON PRICING, NATIONAL LEVEL STRATEGY

Relative to last year, 17 additional indicators were added tothe banking assessment, including more robust assessment
criteria, additional topics and more concrete expectations.
These additions include, among others, double materiality
assessments, E&S considerations in the appointment ofboard members, the integration of deforestation and wider
habitat conversion in decision-making, the integration of
E&S risk and impact data in IT infrastructure, the disclosureof time-bound and science-based transitions plans withassociated measures for contributing to a net-zero andnature-positive financial sector and science-based, climate
and environmental-related nominal anchors as objectives
beyond conventional ones (e.g., price stability, full
employment, etc). See Figures 2 to 4 for the overview
of indicators applied in the assessment. The indicator
numbers are referenced throughout the report.
11

THE SUSREG FRAMEWORKFIGURE 2: OVERVIEW OF BANKING SUPERVISION FRAMEWORKFIGURE 3: OVERVIEW OF CENTRAL BANKING AND ENABLING ENVIRONMENT FRAMEWORKCENTRAL BANKINGENABLING ENVIRONMENTCENTRAL BANK PRACTICESMARKET

BANKING SUPERVISIONBANK PRACTICES

1.1

SUPERVISOR PRACTICES

1.2

1.3

1.4

1.5

1.6

1.7

1.8

2.1

2.2

3.1

SCOPE &
IMPLEMENTATIONSTRATEGY & GOVERNANCE

POLICIES &PROCESSESPORTFOLIO RISK
& IMPACTMICRO-PRUDENTIALDISCLOSURE &TRANSPARENCY

MACRO-PRUDENTIALLEADERSHIP & INTERNALORGANISATIONMONETARY POLICYLEADERSHIP & INTERNALORGANISATIONOUTSIDE SUPERVISOR / CENTRALBANK MANDATERegulations or supervisory
expectations

Business & risk strategy

Sector policies

Manage portfolio
E&S risk

Integrating E&S into ICAAP

E&S in business policies& processes

Supervisor’s stress testing

NGFS membershipfor supervisors

Corporate asset
purchase programs

NGFS membership for
central banks

Multi-stakeholder initiative

E&S topical scope

Risk appetite

Standards & certification

Scenario analysis& stress testing

Minimum capitalrequirements

Time-bound transition plan

Stress testing method

Supervisor’s E&S strategy

Collateral framework

Nominal anchors

Capacity building efforts

Double materiality
assessment

Long-term consideration

Client support

Management of negative
E&S impacts

Liquidity risk management

Internationally recognised
reporting frameworks

Stress testing publication

Internal organisation& resources (FS)

Scope of regulations

Board communication

Supervisor risk checklists

Climate target setting

Liquidity ratios

Disclosure in annual report

Risk exposure indicators

Study on banking’s exposure

Supervisor assessment

Remuneration policy

Integration in policies& processes

Science-based target
for natureIndustry credit exposure

Exposure limit

SDG alignment

Public consultation

Staff & resources

Integration ofnature-related risks

Manage reputation& litigation risk

Disclosure against taxonomy

Systemic E&S risks in capitalrequirements

Staff training

Board appointments

Internal controls

Validate third parties’
analysis

Portfolio exposure& mitigation

Study on transmission
channels

Board responsibilities

Non-compliance mitigation

Material negative
E&S impact

Data quality initiatives

Executive management
responsibilities

E&S credit clauses

External assurance
for disclosures

Core functions

Active client engagement

Training

Data & IT infrastructure

Foreign exchange reserves

Central bank’s E&S strategy

Green taxonomy

Subsidised & targeted loans

TCFD disclosure

Brown taxonomy

Reserve requirements

Internal organisation& resources (CB)

Corporations sustainability
reporting

CB portfolio risk exposure

Corporations transition plan

Asset management

Carbon pricing

Taxonomy alignment

National-level sustainability
strategy
Regulations onsustainable products
Transition targets& incentives

Stakeholder involvement
Sustainability considerationsin policies

FIGURE 4: OVERVIEW OF INSURANCE SUPERVISION AND ENABLING ENVIRONMENT FRAMEWORKENABLING ENVIRONMENTINSURANCE SUPERVISIONBANK PRACTICES

1.1
SCOPE &
IMPLEMENTATION
Regulations or supervisory
expectations

SUPERVISOR PRACTICES

1.2

1.3

1.4

STRATEGY & GOVERNANCE

POLICIES &PROCESSESPORTFOLIO RISK
& IMPACTMICRO-PRUDENTIAL

Sector policies

Manage portfolio
E&S riskEnterprise Risk Management
framework*

Business & risk strategy

1.5

1.6

MARKET

1.7

1.8

3.1

DISCLOSURE & TRANSPARENCY

MACRO-PRUDENTIALLEADERSHIP& INTERNALOUTSIDE SUPERVISOR /CENTRAL BANK MANDATE

E&S in business policies& processes

Supervisor’s stress testing

NGFS membershipfor supervisors

Multi-stakeholder initiative

Solvency capitalrequirements*

Time-boundtransition plan

Stress testing method

Supervisor’s E&S strategy

Capacity building efforts
Green taxonomy

E&S topical scope

Risk appetite

Standards & certification

Scenario analysis& stress testing

Double materiality
assessment

Long-term consideration

Client support

Management of negative
E&S impacts

Expectationsof reinsurers*

Internationally recognised
reporting framerks

Stress testing publication

Internal organisation& resources (FS)Supervisor assessment

Board communication

Supervisor risk checklists

Climate target setting

Product development*

Disclosure in annual report

Risk exposure indicators

Study on banking’s exposure

Brown taxonomy

Public consultation

Remuneration policy

Integration in policies& processes

Science-based target
for natureIndustry credit exposure

Exposure limit

SDG alignment

Corporations sustainability
reportingStaff & resources

Integration ofnature-related risks

Risk concentration& ALM*

Disclosure against taxonomy

Obligatory Insurance
mandates*

Staff training

Corporationstransition plan

Board appointments

Internal controls

Natural catastrophe claims*

Portfolio exposure& mitigation

Integrated financialgroups supervision*

Study on transmission
channels

Carbon pricing

Board responsibilities

Non-compliance mitigation

Manage reputation& litigation risk

Material negative
E&S impact

Systemic E&S risks incapital requirements

Data quality initiatives

National-levelsustainability strategy

Executive management
responsibilities

Active client engagement

Validate third parties’
analysis

Greenwashing risks*

Engagement with reinsurers*

Regulations onsustainable productsCore functions

Data & IT infrastructure

Risk concentration
management*

External assurance
for disclosures* Insurance specific

12 | SUSREG ANNUAL REPORT 2022

Incentives for productdevelopment

Training

E&S risk in pricing*

Public-private partnerships*

Stakeholder involvement

Pricing incentives*

Disaster risk
reduction facilities*© Shutterstock – Jim & Lynne Weber

Sustainability considerationsin policies

13

THE SUSREG FRAMEWORKKEY ELEMENTS OF THE SUSREG TRACKER

Independence: The SUSREG tracker is anindependent assessment rather than a member-driven
assessment. Importantly, SUSREG does not rank
countries/central banks/supervisors but focuses onproviding a comparative analysis of relevant policies
against the framework and against each other.
Maturity: Even though the SUSREG indicators
are not weighted (see the box on methodologicallimitations below) given the importance of eachindicator for various phases of implementation
by central banks and financial supervisors, theassessment enables the identification of areas where
significant progress still needs to be made, while
tracking changes over time.

Thematic scope: It covers climate, environmental,
and social risks given the significance of the intertwined
climate and nature crisis and its impact on humanity.

Indicators: The SUSREG tracker encompasses
a broad spectrum of indicators relevant to greening
the financial system including rule-based microprudential supervision, macro-prudential supervision,
central banking (monetary policy, portfolio
management), the existence of strategy/internalorganisation of the supervisor/central bank, andenablers such as science-based taxonomies, and theexistence of a multi-stakeholder sustainable financeinitiative.



Relevance: The framework also considers recent
concepts and developments such as double materiality
assessments, the integration of liquidity risk andcapital adequacy, transition plans, and net zeroroadmaps.
Transparency: Each indicator and assessment
are documented with relevant policies, guidelines,
frameworks, roadmaps, etc. (which will be reflectedin the online tracker).

Standardisation: The evaluation considers if thecountry has “fully met”, “partially met” or “not met”
an indicator (or N/A in certain cases) based ona detailed assessment guide.

Sector scope: The tracker now covers both banking
and insurance sectors, which are key components ofthe financial system.

14 | SUSREG ANNUAL REPORT 2022

ASSESSMENT METHODOLOGY
In performing the assessments, WWF has considered
the following sources (non-exhaustive list):Financial regulators or supervisors: Regulations,supervisory expectations, or guidelines.

Central banks: Measures and activities implemented
by central banks (in particular those related to monetary
policy), in line with their mandate.

Industry associations: Relevant guidelines issued by
the national banking and insurance association or otherindustry-led bodies, where available.



Securities commissions or stock exchanges:
Relevant listing rules or sustainability reporting guidelines,
in the absence of regulations or guidelines issued by theregulator, supervisors, or associations.
Others: Measures taken by central banks, banking andinsurance regulators or supervisors, governments, andother policymakers, to create an enabling environment
conducive to the development of sustainable finance.

Two layers of assessment were pursued: regulation
enforceability level and coverage. In the first stage, WWFassesses the enforceability to determine whether a certain
expectation towards supervised entities is mandatory andenforced. The second stage assesses whether the scope ofthe source of information encompasses all supervised
entities or only specific segments of supervised entities.
In the absence of regulations or guidelines issued by thefinancial regulator on sustainable banking and insurance,
WWF considered relevant guidelines issued by either
the securities commissions or stock exchanges, nationalbanking/insurance associations, or other industry-led
bodies, where available. Although regulations issued by thestock exchange or securities commissions and guidelines
issued by the national banking association or other industryled bodies are considered important drivers of change, in
our view the issuance of stringent and mandatory
regulations is the most conducive solution to theuniform integration of environmental and social
considerations within the banking and insurance sector,
and therefore should be actively pursued.
While certain supervisory expectations are only applicableto financial institutions of a certain size, SUSREG assessment
does not differentiate this distinction and assesses thesubstance of the supervisory expectations regardless of theircoverage in terms of size of financial institutions.

© Shutterstock – Terrance Emerson

ASSESSMENT OF THE
EUROPEAN UNION (EU)ASSESSMENT OF THE
UNITED STATES OF AMERICA (USA)Given the specific conduct of banking and insurance
supervision and monetary policy in the EU, the results of
our assessment of individual European countries should
be considered in parallel to the results of our assessmentof the EU.

This year we include two states (California and New York)in addition to the national (federal) assessment for theUSA. State jurisdictions can have their own regulation andsupervisory agencies (such as the New York Departmentof Financial Services or the California Department of
Insurance), although they do not have fully-fledged central
banks (in the semi-decentralised Federal Reserve Banksystem, regional Federal Banks such as New York and
San Francisco follow the federal monetary policy and act
as delegated supervisors). Since federal regulation in the
USA assessment applies to all its states, individual statessuch as California and New York may only have SUSREG
assessments equal to or higher than the USA assessment(when local initiatives go further than national policy).

The Eurosystem comprises the ECB and the national
central banks of the EU Member States whose currency isthe euro. Under the Eurosystem, the ECB is in charge ofdefining the monetary policy while national central banks
should implement it. Therefore, the assessment results
for monetary policy measures in individual EU countries
that have adopted the euro is marked as “N/A”, and it isnecessary to refer to the assessment performed at the EU
level. The only exception to this rule is the managementof foreign exchange reserves, over which national central
banks have full autonomy.
All the EU-level regulations in force will be applied to EU
country-level assessments. In the case of the EU directives(e.g., Corporate Sustainability Reporting Directive) thathave not yet taken effect in the EU-regulated markets,
we consider them as “partially met” at the country level.
Similarly, we include proposed and draft EU regulations21
and directives at the country level, with a maximum
score of “partially met”. In principle, we do not use
guidelines such as those issued by EBA/ECB/EIOPA
in the country-level assessment,22 unless the financial
supervisor specifically mentioned that it will be applying
the guidelines as part of its supervision.

Please note that for insurance regulation and supervision,
the situation in the USA is fragmented and relatively
complex. In principle, the national insurance supervisor
is the Treasury Department’s Federal Insurance Office(FIO). In practice though, the FIO plays a limited role,such as identifying any gaps in the state-based regulatory
system. Actual insurance regulation and supervision are
applied state-by-state, sometimes with wide discrepancies
in the rules and practices observed between individualstates. The NAIC (National Association of InsuranceCommissioners) is an important national forum thatcan make recommendations and promulgate model
regulations and laws on occasion, which then form thebasis of many states’ supervisory rules and procedures.
USA states can choose to adopt NAIC proposals, in somecases automatically.

15

THE SUSREG FRAMEWORKGEOGRAPHICAL SCOPE
Principle-based regulation may not always
explicitly address all the areas covered by thedetailed SUSREG indicators. To assess the fulfilmentof the indicators, as well as the vagueness of the
expectations, interpretation was necessary. In someinstances, the mere discussion of issues without
concrete actions and expectations by financial
supervisors may not meet the full criteria of certain
assessment indicators.
WWF has used its best efforts to share preliminary assessment
results with the relevant institutions in each country. The
resulting dialogue has often led to a better understanding of
the institutions’ practices and feedback has been incorporated
where relevant. It should however be noted that feedback
from an institution should not be construed as an official
endorsement of the SUSREG methodology or results. Whilespecific situations and differing interpretations were discussed
during feedback sessions, it is important to note that the final
judgement was made by WWF.

is beyond the scope of the current exercise. Only publicly
available information has been taken into account at thetime of the assessment which was performed between JulySeptember 2022.
When official documents were not available in English, unofficialtranslations were relied upon to facilitate comparison andaccessibility. For more details on the assessment methodology,
please refer to the 2021 ‘Introducing SUSREG’ launch reportand our 2022 SUSREG launch report for insurance.

The assessment has expanded from 38 jurisdictions in 2021 to
44 jurisdictions in 2022 across the Americas, EMEA (Europe,
Middle East, and Africa), and APAC (Asia Pacific). Thesejurisdictions cover more than 88% of the global GDP23 and 72%
of global GHG emissions,24 and 11 of the 17 most biodiversityrich jurisdictions25 in the world. Most of the jurisdictions are
members and observers of the Basel Committee on Banking
Supervision (BCBS), the International Association of Insurance
Supervisors (IAIS), and the Network of Central Banks andSupervisors for Greening the Financial System (NGFS).
Forty-two jurisdictions have been assessed for both banking
and insurance, and out of the 44 jurisdictions, two (Saudi
Arabia and Zambia) have been assessed only for banking
and another two (Bermuda and Taiwan) only for insurance.
Please refer to Annex 2 for the detailed list of the central
banks, banking/insurance regulators, and supervisors
covered by this assessment.

Although the results distinguish between the level of stringency
of applicable regulations or guidelines, the extent to whichsuch measures are adequately and effectively implemented

METHODOLOGICAL LIMITATIONS

Publicly available information: The SUSREG tracker only considers publicly available information, therefore it does
not account for any internal and ongoing developments which may give a more accurate picture of where certain central
banks and financial supervisors are standing.

No weighting of indicators: The indicators are not weighted, even though certain indicators might encapsulate anarguably more impactful action than others. The rationale behind this is that the SUSREG tracker is not a ranking but
rather a benchmarking exercise of each central bank and financial supervisor’s activities against each indicator. The
purpose of the SUSREG tracker is to foster best practice sharing across jurisdictions over all the individual indicatorsand sections.



Existence, not effectiveness: Although the aim is effective mitigation by central banks and financial supervisors ofpresent and future risks relating to climate change and nature loss, the SUSREG tracker focuses on the pursuit of certain
practices and the existence of certain policies, therefore, it does not necessarily draw any conclusion on their effective
impact.



Environmental focus: The scope of the SUSREG tracker, on most indicators, is equally split across «C» climate,«E» environment, and «S» social, as WWF welcomes holistic sustainable finance regulation that covers environmental
and social aspects in conjunction. However, the most stringent focus has been put on the «E» and «C» across theindicators, in line with our expertise in the respective fields.

16 | SUSREG ANNUAL REPORT 2022

AMERICAS
BERMUDABRAZILCALIFORNIA (US STATE)CANADACHILECOLOMBIACOSTA RICA
MEXICONEW YORK (US STATE)USA

DENMARKEUROPEAN UNIONFRANCEGERMANYGREECEHUNGARYITALY
KENYA
LUXEMBOURG
MOROCCONETHERLANDSEMEANORWAYPORTUGALSAUDI ARABIASOUTH AFRCIASPAINSWEDENSWITZERLAND
UAE
UKZAMBIAAPAC

AUSTRALIA
CHINA
HONG KONG
INDIA
INDONESIAJAPAN
MALAYSIANEW ZEALAND
PHILIPPINESSINGAPORE
SOUTH KOREATAIWANTHAILAND

17

A GUIDE TO THIS REPORTThe different colours on the graph represent the scoring

In the case of insurance, for certain indicators,

provided based on the assessment of the indicators as follows:

the assessment results are split into investment

ENVIRONMENT

Such as biodiversity loss, habitat destruction,
deforestation, depletion of natural resources, andwater, air and soil pollution, as well as physicaland transition risks related to nature loss

Insurers are expected to integrate E&S considerationsin their business and risk strategy, consistent with thesize and nature of their operations.

4

AMERICASINVESTMENT

5

2

2

5
2

5

2

10

3

16
7
5
4

2

5

3

2

5
4

4

1

4

3

5

3

2

3

3

4

3

3

4
14

UNDERWRITING

2

9

3

4 1

12

4

3

12

4

3

14

INVESTMENT

2

14
2

1

UNDERWRITING

EMEA

5

3

4

4
2

12

4

3

12

4

3

3

8
6

4

3
3

3
6

3
4

2

4 1

6

4

APAC

9 COUNTRIESAMERICAS

3

3

EMEA

Banks are expected to integrate E&S considerationsin their business and risk strategy, consistent withthe size and nature of their operations.

21 COUNTRIESSuch as greenhouse gas emissions, physical andtransition climate-related risks as well as broader
climate-related impacts

BUSINESS AND RISK STRATEGY (1.2.1)

APAC

CLIMATE umber of countries where the assessment is notNapplicable or outside the legal mandate of the central
banks and/or financial supervisors.

12 COUNTRIESResults are also often broken down according to the following
three distinct themes: umber of countries where there are expectations inNplace, but they do not satisfy the indicator (“Not met”).

INDICATOR 1.2.1

UNDERWRITINGGood practices from central banks andfinancial supervisors are represented bythis pictogram:

In each section, graphs present aggregated results which
are generally broken down by regions, namely the Americas,
EMEA, and APAC. The assessment covers 10 countries in
the Americas, 21 EMEA countries, and 13 APAC countries.

of the associated measure(s).

 umber of countries where there are expectations
Nin place, but they only partially satisfy the indicator
criteria (“Partially met”). This can be due to parts of theindicator not being addressed, or an overall lower level of
expectation. More details on the assessment methodology
are provided in the SUSREG Assessment Guide.

Key insights are represented by this pictogram:

The indicators comprehensively span across the macro,
micro, and external environmental aspects of the financesector. Despite certain limitations, the findings serve to
inform the stakeholders of their current overall standing
globally, to provide insights and key takeaways from ouranalysis, and to study as well as share good practices acrossjurisdictions over indicators and sections. These may
contribute to future policy-making and/or environmental
and social strategy implementations through better
understanding along with comparisons to helpful benchmarks.

and underwriting in order to clearly display the scope umber of countries where there are expectations26
N
in place and they fully satisfy the indicator criteria(“Fully met”).

INVESTMENT

This report describes the results of WWF’s analysis ofa selection of key indicators, grouped in sections that follow
the SUSREG framework structure. References to the relevant
SUSREG indicators are provided throughout the text. The
report also provides our key findings and recommendations,as well as interviews with central banks and banking andinsurance supervisors and regulators.

3
6
8

SOCIAL

Such as human rights violations and adverse
impacts, labour issues (including occupational
health & safety), and adverse impacts on
indigenous and local communities© Shutterstock – Darkdiamond67

18 | SUSREG ANNUAL REPORT 2022

19

BANKING FINDINGSBANKING
SUPERVISION© Shutterstock – Darkdiamond67

20 | SUSREG ANNUAL REPORT 2022

21

BANKING FINDINGS – BANKING SUPERVISIONMICRO-PRUDENTIAL
SUPERVISIONREGULATIONS OR SUPERVISORY EXPECTATIONS (1.1.0)

INSIGHTS

Principle-based regulations or supervisory expectations
related to sustainable banking have been issued andapply to all supervised commercial banks.

A “trickle-down” approach to environmental risk
regulation—assuming that focusing on safeguarding
the large banks will result in the protection of smaller
financial entities and the financial system more broadly—is an inadequate response to climate and nature-relatedrisks and impacts. Financial institutions not covered by
the trickle-down approach could fail as climate change
simultaneously affects natural and human systems
across geographies in an interconnected manner.27(SUPERVISORY EXPECTATIONS)NORWAY

Regulations or expectations related to sustainable banking
have been issued and applied by 62% of all banking
jurisdictions in the assessment in 2022, compared
to 35% in 2021. Only five jurisdictions out of 42 do
not have relevant supervisory expectations in place.

SWEDENNETHERLANDSCANADA

DENMARKUNITED KINGDOMGERMANYLUXEMBOURG
EUROPEAN UNIONNEW YORK STATEUSA
CALIFORNIA STATEPORTUGALFRANCESPAIN

HUNGARYSWITZERLAND
JAPAN

ITALY

GREECECHINA

MOROCCOSOUTH KOREASAUDI ARABIAMEXICOUAE
INDIA

HONG KONG

THAILAND

PHILLIPINESCOSTA RICA

COLOMBIAKENYAThis section examines expectations
towards banks regarding the integrationof E&S considerations in their businessstrategy, governance, decision-making,disclosure, and risk management policies
and processes, including the portfolio
level. It applies to regulations, supervisory
expectations or guidelines (issued by
the regulator, supervisor, or the nationalbanking association) that pertain
to sustainable banking practices.
22 | SUSREG ANNUAL REPORT 2022

SINGAPORE

MALAYSIAINDONESIA
BRAZILZAMBIA

AUSTRALIA
CHILE
SOUTH AFRICANEW ZEALANDDISCLAIMER: The boundaries and names used on this map are indicative and do not imply official recognition by WWF

23

BANKING FINDINGS – BANKING SUPERVISIONMICRO-PRUDENTIAL SUPERVISION (SUPERVISORY EXPECTATIONS)SCOPE & IMPLEMENTATION

E&S TOPICAL SCOPE (1.1.1)

The regulations or supervisory expectations cover a broad range of environmental and social (E&S) issues.

Supervisory expectations for climate are fully (69%) or partially (19%) covered in the jurisdictions assessed.
Other environmental issues are fully covered in about 43% of the jurisdictions, and social issues are coveredin about 28%.

NORWAYCANADASWEDENDENMARKUNITED KINGDOMNETHERLANDSGERMANYLUXEMBOURG
EUROPEAN UNIONNEW YORK STATEUSAPORTUGALHUNGARYFRANCESPAIN

SWITZERLAND
JAPAN

ITALY
GREECECALIFORNIA STATE

CHINA

MOROCCOSOUTH KOREASAUDI ARABIAMEXICOUAE
INDIA

HONG KONG

THAILAND

PHILLIPINESCOSTA RICA

MALAYSIA

COLOMBIAKENYA

SINGAPORE
INDONESIA

Regulations issued by financial
supervisors require accountability andaction, supported by the enforceabilityof the expectations and subsequent
supervision. With the interrelation
between climate change and natureloss made clear, it is imperative thatsupervisory expectations and regulations
encompass both aspects hand-in-hand.

BRAZILZAMBIA

AUSTRALIA
CHILE
SOUTH AFRICA

6
5
4
3
2
1
0

The colours in the map represent the aggregate score of indicator
1.1.1 of each jurisdiction in their climate, environment and social risks
coverage. A ‘fully met’ score is given 2 points, ‘partially met’ is given
1 point and ‘not met’ is given 0 points. For example, if a jurisdiction
has a fully met score on climate, a partially met score on environment,
and does not meet the social criteria, a total of 3 points is given.

NEW ZEALANDONLY BANKING ASSOCIATION GUIDELINES

24 | SUSREG ANNUAL REPORT 2022

25

BANKING FINDINGS – BANKING SUPERVISIONMICRO-PRUDENTIAL SUPERVISION (SUPERVISORY EXPECTATIONS)INSIGHTS

Geographical differences: Financial regulatory
efforts are greater in the geographies more remotefrom the “globally systemically important natural
assets”. Whilst large parts of the Global South are
where intact biodiversity resources are situated,action by financial regulators has so far emerged
most rapidly from the Global North.28 Although thisis an important development, the recently launched
NGFS task force on biodiversity loss and naturerelated risk shows commitment among the central
banks and financial supervisors in tackling this issue.29
Double materiality: Materiality evolves andover time, financially immaterial information could
become material in the future, i.e., relevant forinvestors.30 Although not yet endorsed by the ISSB,
their recent public consultation responses show wide
support within the financial sector and civil society
groups for double materiality (impact materiality)and not just for focus on enterprise value.31
Materiality and systemic risk: The double
materiality perspective becomes more importantwhen considering macroprudential objectives driven
by financial sector externalities. The impact of one
bank’s activities may increase the risk of anotherbank, increasing the aggregate impact of the financial
services that contribute to climate change.32

GOOD PRACTICES
1.1.1: 	
Banco Central do Brasil’s new regulation
on risk management and social,environmental, and climate responsibility
covers key issues including (a) transition andphysical risks under climate risks, (b) naturaldegradation, deforestation, biodiversity loss,
pollution, and natural resources exploitation
under environmental risks, and (c) humanrights and labour standards under social risks.
1.1.2: 	The EU Non-Financial Reporting Directive(NFRD)33 has a double materiality perspective.
Climate-related information should be reported
if it affects the value of a company. Companies
should also report on climate risks impactthat they created as a company’s impact on its
surroundings is of interest to a wide range ofstakeholders. In 2023, the NFRD will morph
into the Corporate Sustainability Reporting
Directive (CSRD).
1.1.3: Bank Negara Malaysia’s Value-basedIntermediation Financing and Investment
Impact Assessment Framework (VBIAF)
outlines the framework to facilitate the establishmentof an effective risk management system for financing
and related advisory services and investment
activities that integrate the E&S consideration.

DOUBLE MATERIALITY ASSESSMENT (1.1.2)

The regulations or supervisory expectations reflect both the expected impact of E&S issues on the bank’s risks
and value creation, and the impacts of the bank’s activities on E&S issues (’double materiality assessment’).

AMERICAS 9 COUNTRIESEMEA 21 COUNTRIES

2

5

1

2

12

APAC 12 COUNTRIES

8

4

6

2

Supervisory expectations on double materiality are only fully reflected in 17% of the jurisdictions. Including partial
expectations, 71% of the jurisdictions’ supervisors are reflecting some double materiality considerations.

SCOPE OF REGULATIONS (1.1.3)

The regulations or supervisory expectations extend beyond lending to cover other financial products & services
provided by banks.

AMERICAS 9 COUNTRIESEMEA 21 COUNTRIESAPAC 12 COUNTRIES

2

3

5

1
12 12

1
4

25
86

3
8

62

22

Supervisory expectations on E&S issues do not extend beyond lending in 13 jurisdictions. Looking beyond lending to cover otherbanking activities is particularly uncommon in the Americas, where only four out of nine assessed jurisdictions are doing so.

© Shutterstock – NABODIN

26 | SUSREG ANNUAL REPORT 2022

27

BANKING FINDINGS – BANKING SUPERVISIONMICRO-PRUDENTIAL SUPERVISION (SUPERVISORY EXPECTATIONS)
BUSINESS AND RISK STRATEGY (1.2.1)



28 | SUSREG ANNUAL REPORT 2022

5

2

10

3

16

APAC

12 COUNTRIES

7

4

5
4

1

4

3

5

3

9 COUNTRIESAMERICAS
EMEA

EMEA

21 COUNTRIES

2

21 COUNTRIES

5

2

4

3

1

8

1

8
12
9

2

7

2

10
19

1 1
5

APAC

5

2

12 COUNTRIES

9 COUNTRIESAMERICAS

2

2

3
2

5

2

2

7

2

8

BOARD COMMUNICATION (1.2.4)

SUSTAINABILITY CONSIDERATIONS IN POLICIES (1.2.13)

8

1

8
11

10

8 1
1

12

2

18
5
4
3

3

4
8
9

This expectation is fully or partially applicable in about half
the jurisdictions assessed with climate as the topic withthe clearest supervisory expectations. Environmental andsocial information is only fully applicable in 21% of thejurisdictions.

9 COUNTRIES

17AMERICAS

4EMEA

9 COUNTRIES

3

21 COUNTRIES

2

The supervisor expects banks to embed sustainability
considerations in their existing code of conduct andinvestment, lending, and risk guidelines (rather than
only as separate documents).

APAC

Banks are expected to regularly provide their board
with relevant information related to the implementationof their E&S strategy.

12 COUNTRIES

1.2.1:	In the Circular CSSF 21/773 on theManagement of Climate-related andEnvironmental Risk, the Commission de
Surveillance du Secteur Financier (CSSF)
of Luxembourg mentioned that institutions
are expected to integrate materially significant
climate-related and environmental risks in theirbusiness strategy in the short-, medium-, orlong-term. Institutions should also factor suchrisks into their internal communication when
implementing their strategy.
1.2.3: Banco Central do Brasil, in their new
regulation on E&S risk disclosures, requires
identification of E&S risks that could potentiallycause relevant losses as well as identificationof business opportunities that could potentiallygenerate revenues to the institution in short-,
medium-, and long-term.
1.2.4:	In their Guidance on Climate-Related Risk
Management, the Central Bank of Kenya
stipulated that to facilitate effective oversight,
the board should regularly be provided with
relevant management information, as wellas updates on major policy initiatives anddevelopments concerning climate-related issues.
1.2.13:	The Task Force on Climate-related
Financial Disclosures (TCFD) guidefor Malaysian financial institutions
recommends disclosing how the institutions
have integrated climate-related risks into existingrisk framework(s) and/or directly into credit
and investment decision-making (e.g., lending
policies, underwriting standards, risk ratings,
pricing models).

2

9

AMERICASCorporate governance: The NGFS highlights that
one of the instrumental ways to manage E&S risks isthrough effective corporate governance.34 Supervisors
should expect financial institutions to clearly define
and assign responsibilities within existing governancearrangements. E&S factors should be embedded inboard-level commitments, fit and proper tests for theappointment of boards, remuneration policies, current
organisational structures, risk profiles, and throughthe provision of adequate resources and expertise to
manage E&S risks in the organisation.
Time horizon: CBFS’ time horizons must be
extended to 10-30 years to ensure that short-term
financial flows that may have significant long-term
consequences for losses and instability are treatedas higher risk.35 Longer terms allow for wider
planning across banks’ scopes
and stakeholders that can result in a holistic change.
Qualitative information: The Taskforce on
Nature-related Financial Disclosures (TNFD)
Financial Markets Readiness Assessment 2022
recognises the usefulness of qualitative information,
particularly concerning the framework’s Strategy
and Governance pillars. Qualitative information,
so long as it is verifiable and of high quality, can beconsidered as a way to report on a portfolio’s impacts
on nature and various dimensions of sustainability.36
Climate risk management principles: The BaselCommittee on Banking Supervision issued a set ofprinciples for the management and supervision ofclimate-related financial risks. The principles cover
governance, internal controls, capital and liquidity
adequacy, risk management processes, reporting andmonitoring as well as credit, markets, liquidity, andoperational risks.The supervision principles can also
be adapted to include biodiversity considerations.37

1

There are higher expectations towards including long-term
considerations in APAC and EMEA than in the Americas,
and higher for climate than for other issues. Social aspects
have the lowest score with 35 out of 42 jurisdictions nothaving supervisory expectations towards long-termplanning of social considerations.

EMEA



GOOD PRACTICES

5

14
2

Banks are expected to extend E&S consideration beyond
the short term (1 to 5 years) to the medium (5 to 10 years)
and longer-term (10 to 30 years) in their business andrisk management.

The supervisory expectations of integrating climate
considerations into banks’ business and risk strategies
are fully and partially applicable in over 83% of thejurisdictions assessed (57% for full score). For environmental
and social matters, expectations are lower and only foundin 57% (38% for full score) and 43% (19% for full score)
jurisdictions respectively.

21 COUNTRIESINSIGHTS

3

APAC

Banks should be expected to consider how E&S risks and opportunities
impact their activities, and to integrate these considerations into theiroverall business strategy and governance, factoring in the long-term
nature of these risks. In this section, ‘E&S strategy’ refers to a bank’sbusiness strategy incorporating E&S considerations in providing
financial products and services to clients.

12 COUNTRIESSTRATEGY & GOVERNANCE

LONG-TERM CONSIDERATION (1.2.3)

Banks are expected to integrate E&S considerationsin their business and risk strategy, consistent withthe size and nature of their operations.

2

3

6

3

6
10

5

6

10

5

6

9

5

3

7
8

7
6

1
5
6

These expectations are relatively common in EMEA, with
71% of EMEA jurisdictions scoring full or partial (46% for
full score in EMEA). They are not fully clear for any of theenvironmental and social matters in the Americas and APAC,
with only three APAC jurisdictions having clear expectations
on climate matters.

29

BANKING FINDINGS – BANKING SUPERVISIONMICRO-PRUDENTIAL SUPERVISION (SUPERVISORY EXPECTATIONS)INTEGRATION IN POLICIES AND PROCESSES (1.3.5)



3

9
7

APAC

12 COUNTRIES

5

6

6
4

1

6

2

4

6

2

4

9 COUNTRIESAMERICAS

8

EMEA

13

4

1

21 COUNTRIESEMEA

21 COUNTRIES

3

APAC

6

12 COUNTRIES

9 COUNTRIESAMERICAS

3

4

17

1

3

8

INTERNAL CONTROLS (1.3.7)

DATA AND IT INFRASTRUCTURE (1.3.11)

8

1

8
9
8

1
3
2
2

7

4

9

11

9
5

3
2

5

4
7
8

Expectations towards climate risks are partially applicablein 15 jurisdictions and fully applicable in 13 jurisdictions.
For environmental and social matters, expectations are fullyor partially applicable in 18 and 17 jurisdictions, respectively.

9 COUNTRIES

1

1

AMERICAS

3EMEA

9 COUNTRIES

5

21 COUNTRIES

1

The supervisor expects banks to develop systems
that are integrated into the banking group’s broader
data governance and IT infrastructure to collect andaggregate E&S risk and impact data effectively.

APAC

Banks are expected to put in place internal controls
to manage E&S risks, in accordance with the three linesof defence approach.

12 COUNTRIES

1.3.5: 	Mexico’s Sustainability Protocol requires
financial institutions to establish a risk analysis
system that incorporates E&S risks into credit
and investment policies. This is to enable themto evaluate, prior to granting financing, the credit,
collateral, and image risks associated with thenegative impacts that the activities may generate.
1.3.6: 	In Malaysia, the Value-basedIntermediation Financing and Investment
Impact Assessment Framework (VBIAF)*
mentions biodiversity loss and deforestation,
UNESCO World Heritage Sites, wetlands on
the Ramsar list, protected areas as per theInternational Union for Conservation of Nature’s(IUCN) categories I to IV, and Key Biodiversity
Areas in its exclusion list.
1.3.7:	In the Guidance Notice on Dealing with
Sustainability Risks, the Federal Financial
Supervisory Authority of Germany(BaFin) recommends that internal audits
should also address the appropriate handlingof sustainability risks. In particular, this should
include an assessment of the appropriatenessof the revised rules for the organisational andoperational structure, risk management and thespecific functions as defined by BaFin’s MaRisk(Minimum Requirements for Risk Management).
1.3.11: 	The Banca d’Italia describes in its
supervisory expectations on climate andenvironmental risks that intermediaries
should put in place actions to provide high-quality
information in a system to support the developmentof metrics for climate and environmental risk
assessments. Intermediaries are required to commit
to the data collection and storage, and to establish
a constructive dialogue with counterparties.

6

14

AMERICAS

Integrating deforestation into policy:
The University of Cambridge Institute for
Sustainability Leadership (CISL) has publisheda new report detailing how the banking industry
can contribute to halting and reversing
deforestation. The Action Plan maps out banks’role in advancing policy alignment and traceability,
scaling sustainable supply, setting measurable
targets and accountability, as well as enhancing
the value of leading banks’ evolving expertise intransitioning clients by advocating for government
action on halting and reversing deforestation.38
Nature-related risk: In 2022, the NGFS
acknowledged that nature-related risks could
have significant macroeconomic and financial
implications. Banks should build capacity to address
nature-related financial risks, request physical asset
location data from their counterparties, enhance
supply chain traceability, and develop innovative
finance instruments for nature-positive activities.39
Data governance: The Bank for International
Settlements (BIS) recommends that banks actively
engage clients and counterparties in collecting
additional data to better understand their transition
strategies and risk profiles. Where reliable orcomparable climate-related data is unavailable,banks may consider using reasonable proxies
and assumptions as alternatives in their internalreporting as an intermediate step.40
Nature-related data: TNFD launched the Naturerelated Data Catalyst in July 2022, which brings
together a range of actors from across the naturerelated data landscape to identify shortcomings
in current nature-related data and analytics andrecommend ways to accelerate the development of andaccess to nature-related data, analytics, and tools.41

2

3

While about 20% of the jurisdictions have nature-related
issues listed among a list of general considerations, 80% ofthem do not have any supervisory considerations. Only one
APAC jurisdiction has a clear ask towards banks regarding
their inclusion of deforestation issues in decision-making.

EMEA



GOOD PRACTICES

3

The supervisor asks banks whether and how they integrate
deforestation and wider habitat conversion issues in theirdecision-making, risk management processes and policies.

About 83% of all assessed supervisors are providing clear
or partially clear expectations for banks to integrate climate
in their decision-making, risk management processes andpolicies (59% for full score). On environmental issues andsocial matters, similar expectations are present in morethan half of the assessed jurisdictions in EMEA and APAC
but they are less common in the Americas.

21 COUNTRIESINSIGHTS

4

APAC

Banks should develop sector-specific policies outlining minimum expectations
towards their clients to adequately identify, assess, and mitigate the E&S risks
and impacts that they are exposed to through their business relationships.
They should also develop capabilities to understand the impact of E&S risk
drivers on all financial risks and to incorporate these considerations in the banks’overall decision-making as well as risk management and control processes.

12 COUNTRIESPOLICIES & PROCESSESINTEGRATION OF NATURE-RELATED RISKS (1.3.6)

Banks are expected to integrate E&S considerationsin their decision-making and risk management processes
and policies.

4

4

1

8

1

8
5

5

5

11

3

13

1

20
1
1
1

6
2
1

5
9
10

Expectations towards integrated data and IT systems
covering climate and environmental risks are clear or
partially clear for about 40% of the countries surveyed(only 13% for full score).

* VBIAF serves as a reference for financial institutions (including insurers) intending to incorporate environmental, social and governance (ESG) risk considerations in their own risk management system.

30 | SUSREG ANNUAL REPORT 2022

31

BANKING FINDINGS – BANKING SUPERVISIONMICRO-PRUDENTIAL SUPERVISION (SUPERVISORY EXPECTATIONS)* If there is no overarching goal, targets that are rooted in sub-themes that stem from material
environmental change drivers (land/water/sea-use change, resource exploitation, climatechange, pollution, invasive species and others), at the portfolio level, may be used. It is key
to move from risk management to alignment with science-based climate targets as risk
management alone in line with TCFD does not guarantee emission reductions.

32 | SUSREG ANNUAL REPORT 2022

EMEA

21 COUNTRIES

6

8

5

11

2

19
3

APAC

1

5
3

4
8

2

10

9 COUNTRIESAMERICAS

8

3

5

1

8

1

8

1

EMEA

1

1

21 COUNTRIES

8

Banks are expected to continually assess, manage andmitigate the material negative E&S impacts associatedwith their business relationships at the portfolio level.

13

1

3

APAC

1

5

12 COUNTRIES2MANAGEMENT OF NEGATIVE E&S IMPACTS (1.4.3)

12 COUNTRIES

9 COUNTRIESAMERICAS

6

7

7

12

8

13

8

4

5

2

2

8

2

2

8

Expectations towards applying climate scenario analysis
and stress testing are fully (26%) or partially (40%) includedin the jurisdictions assessed.

Supervisory expectations are included in over half of theassessed jurisdictions. In particular, two thirds of the
EMEA jurisdictions in scope include some sort of partial
expectation. However, full expectations are only includedin five jurisdictions.

CLIMATE TARGET SETTING (1.4.4)

SCIENCE-BASED TARGET FOR NATURE (1.4.5)

6

Expectations are clearly set in only two jurisdictions in
EMEA. Otherwise, partial expectations are included in
one country in the Americas, six jurisdictions in APAC
and a further 12 jurisdictions in EMEA.

769 COUNTRIESAMERICASEMEA

1221 COUNTRIES

2

8

APAC

1

Banks are expected to set science-based targets to mitigate
negative environmental impacts beyond climate, at theportfolio level.

12 COUNTRIESBanks are expected to set climate science-based targets andkeep up to date with the latest climate science, to align theirportfolios with the objectives of the Paris Agreement.
9 COUNTRIES

1.4.2: 	The Superintendencia Financiera de
Colombia in their guidance45 mentions
that credit institutions should consider various
exploratory climate scenarios with different levelsof impact and time horizons in its business models
and that they also should recognize the geographicaland sectoral exposures in their portfolios, including
both physical and transition risks.
1.4.3: 	The Magyar Nemzeti Bank (MNB) of Hungary
in its Recommendation No 5/2021 expects credit
institutions to conduct climate and environmental
risk due diligence on their clients. For loans withhigher ESG risks, a more intensive analysis of
the borrower is required, including a review ofcurrent and projected GHG emissions, the market
environment, the ESG regulatory requirements,
and its impact on the borrower’s financial position.
1.4.4: 	Denmark’s action plan for the financial
sector’s climate partnership mentions
financial institutions shall designate concretetargets for reducing the carbon footprint of theactivities they finance and report on it with theaim of requiring the financial sector to reduce
their carbon emissions by 70%.
1.4.5: 	The Code Monétaire et Financier L53316-1 of France, expects credit institutions andinvestment firms to publish a strategy for alignment
with the long-term biodiversity objectives set for2030, then every five years, on: (a) compliancewith the Convention on Biological Diversity 1992
objectives, (b) contribution to the reduction of
the main pressures and impacts on biodiversity
identified by the Intergovernmental Science-Policy
Platform on Biodiversity and Ecosystem Services(IPBES), and (c) support for a biodiversity footprint
indicator and the way to measure compliance withinternational objectives related to biodiversity.

AMERICASEuropean banks’ review: The ECB’s thematic
review in 2022 shows that almost all banks (96%)
have blind spots in identifying climate andenvironmental risks. Banks do not set interim
targets or limits to their risk-taking with a view
to fulfilling their long-term strategic commitments,
or set them in such a way that the immediate impact
on the bank’s business is negligible. As a first step,the ECB expects banks to adequately categorise
climate and environmental risks and to conduct
a full assessment of their impact on the banks’
activities by March 2023 at the latest.42
Climate target setting: The Guidelines for
Climate Target Setting for Banks by UNEP FI
outline four principles for target-setting: (a)disclose long-term and intermediate targets, (b)establish an emissions baseline and annually
measure and report the emissions profile of theirlending portfolios and investment activities, (c)use widely accepted science-based decarbonisation
scenarios to set both long-term and intermediatetargets, and (d) regularly review targets to ensure
consistency with current climate science.43
Nature target setting: Targets, at a minimum,
should include achieving nature-positive (morebiodiversity than in 2020) by 2030 and fullrecovery and restoration of biodiversity by 2050.*
TNFD released the latest beta framework including
draft guidance on target-setting developed with
the Science Based Targets Network (SBTN) andadditional guidance on risk and opportunity
assessment and the metrics proposed to support
that analysis.44

EMEA



GOOD PRACTICES

1

21 COUNTRIESINSIGHTS

APAC

Beyond the management of E&S risks and impacts at the client andtransaction level, banks are expected to develop a robust understanding of
their portfolio-level exposure to these risks and the extent of their negative
impacts. Banks are expected to set science-based targets on climate andenvironmental aspects in line with what latest environmental science deems
necessary to meet the Paris Agreement and broader global environment goals.

Banks are expected to continually assess, manage andmitigate their portfolio-level exposure to material E&S risks,
by using science-based, forward-looking scenario analysis
and stress testing over the short- (1 to 5 years), medium(5 to 10 years) and long-term (10 to 30 years).

12 COUNTRIESPORTFOLIO RISKS & IMPACTSSCENARIO ANALYSIS AND STRESS TESTING (1.4.2)

9

1 1

19

2

9

1

Banks are expected to set targets fully or partially in only
four jurisdictions worldwide.

33

CENTRAL BANKS AND FINANCIAL SUPERVISORSINTERVIEW:DANMARKS NATIONALBANK
Q1

Could you tell us about Danmarks Nationalbank’s
current plans to foster a more sustainable, green
and resilient financial system in your jurisdiction?
Martin Oksbjerg, Climate Task Force Lead: We takea holistic view of our activities within sustainability andclimate. Climate change and its impacts thus constituteone of the analytical agendas across all our activities.
We currently have colleagues building analytical
capacity on the impact of climate risks on the financial
system and monetary stability, bridging data gaps andensuring sustainable portfolio management.46 Danmarks
Nationalbank assessed credit institutions’ exposure toflood risks based on RCP 4.5 (baseline) and RCP 8.5(worst-case) scenarios. The result shows that the shareof exposures at risk varies from three percent for the
least exposed institution to nine percent for the most
exposed institution.47

Q2

More specifically, how is Danmarks Nationalbank
planning to integrate climate, environmental and/or social considerations in its activities and mandates?
Marcus Mølbak Ingholt, Senior Lead Climate Economist:
Economists work on climate-related economic andfinancial impact assessment, responsible investment
and bridging data gaps. As a case in point, we introduced
additional responsible investment criteria into ourforeign exchange reserve in 2022.48 We now only invest
in exchange traded funds that comply with the EU’s
minimum requirements for Paris Aligned Benchmarks.
We continue our work on ensuring that our financial
portfolios comply with the Paris Agreement, while still
being able to fulfil their mandates. In January 2022,
Danmarks Nationalbank introduced its Green Bond

Framework, as a debt manager on behalf of the Danish
Ministry of Finance. The framework uses a twin bondconcept.49 To date, the framework has raised over
US$ 1.5 billion to help fund Denmark’s green transition.

Q3

What are the main challenges that Danmarks
Nationalbank is facing in the definition andimplementation of its plan particularly in addressing
nature loss and climate change risk? What would
be needed to overcome these?
Marcus Mølbak Ingholt, Senior Lead Climate
Economist: The greatest friction we encounter is thelack of information about climate change and the green
transition. These transformations have no precedent.
Therefore, there is no historical data for how they willproceed. In addition, companies lack knowledge about
their value chains’ reliance on carbon emissions. These
information frictions make it difficult for central banks andfinancial regulators to assess any negative consequences
for corporate profitability of non-transition. Disclosure
requirements are an important tool to alleviate theinformation frictions.

Q4

Has Danmarks Nationalbank formed or plan
to form any external partnership to support
the implementation of this plan?
Martin Oksbjerg, Climate Task Force Lead: We see ourwork as contributing to the agenda at an international
level and are engaged in the NGFS and other international
working groups. We also seek to engage national experts
in specific projects and have worked with the Technical
University of Denmark, on long-term risk of flooding due
to climate change.50© Shutterstock – Vladislav Gajic

34 | SUSREG ANNUAL REPORT 2022

35

BANKING FINDINGS – BANKING SUPERVISION36 | SUSREG ANNUAL REPORT 2022

20
1

APAC

3

8

1

11

1

11

9 COUNTRIESAMERICAS
EMEA

13

21 COUNTRIES

10

5

1

8

1

8
3

18

3

18

1

20
1

APAC

8

4

12 COUNTRIES

9 COUNTRIESAMERICAS

1

1

12 COUNTRIESEMEA

21 COUNTRIES

8

11
12
12

LIQUIDITY RISK MANAGEMENT (1.5.3)

LIQUIDITY RATIOS (INDICATOR 1.5.4)

8

1

8
9
8

12
13

1

20
2
2
1

3

7
10
11

Banks are expected to integrate full or partial climate
considerations in their liquidity risk management in 45%of the jurisdictions assessed (mostly in EMEA), but for otherenvironmental and social matters only in 26% and 7% of all
jurisdictions respectively.

8

9 COUNTRIES

1

1

AMERICAS

4

EMEA

3

21 COUNTRIES

2

Liquidity ratios are adjusted to take E&S considerations into
account, through a differentiated risk-based approach.

APAC

Banks are expected to integrate E&S considerations intheir liquidity risk management process.

12 COUNTRIES

1.5.1: 	
The Bangko Sentral ng Pilipinas (BSP)in their Circular No 1128 requires the boardof directors (or equivalent management
committee in the case of foreign bank branches)to ensure that material E&S risks are consideredin the ICAAP or internal capital planning process.
1.5.2: 	
Banco Central do Brasil (BCB), in their
new regulation on risk management
and social, environmental and climate
responsibility, requires the assessment andmeasurement of the capital requirement to cover
relevant risks to which the institution is exposed,
considers at least social-environmental risk.
1.5.3: 	
Banca d’Italia states in their Aspectsof Surveillance of Climatic andEnvironmental Risks55 that intermediaries
should integrate climate and environmental risks
in measuring and managing liquidity risk.
1.5.4: 	
The Bank Negara Malaysia’s Climate
Risk Management and Scenario Analysis
guide mentions that financial institutions shallperiodically assess the impact that climate-relatedrisks have on the stability of funding, potential
outflows, and adequacy of liquidity buffers byconsidering the possibility of the materialisationof climate-related risks. Where material, theyshould incorporate these impacts into thecalibration of liquidity buffers.

1

8

9 COUNTRIESICAAP: By the end of 2024 banks are expectedby the ECB to meet all remaining supervisory
expectations on climate and environmental risks
outlined in 2020, including full integration in theInternal Capital Adequacy Assessment Process(ICAAP) and stress testing.51
Binding qualitative requirement: Throughthe annual Supervisory Review and Evaluation
Process (SREP), the ECB imposed binding qualitativerequirements on more than 30 banks. The outcomeof the 2022 supervisory exercises on climate andenvironmental risks had an impact on the SREP
scores for some banks, thereby impacting their Pillar 2(supervisory review process) capital requirements.52
Disaster and liquidity: Some evidence suggeststhat post-disaster lending has a significant andnegative effect on liquidity buffers. Severe natural
disasters, like the Great East Japan Earthquake
or Elbe River flood, can trigger a sharp increasein precautionary demand for liquidity by financial
institutions, households and corporates, and thecentral banks may have to intervene in order topreserve financial stability.53
Liquidity modelling: For modelling potential bankliquidity impacts due to climate risk, data reflecting
the rollover, withdrawal, or pricing behaviours(among others) of funding providers (e.g., depositors,
bondholders, wholesale funds) in response to climate
risk drivers would be needed (see BIS Climate-related
Financial Risks – measurement methodologies).54

6

11

AMERICASGOOD PRACTICES

2Minimum capital requirements or capital add-ons
for banks incorporate E&S considerations, througha differentiated risk-based approach.

The incorporation of E&S considerations in minimum capitalrequirements is still a work-in-progress globally, with nosurveyed jurisdiction having set fully-formed expectations.
There are only partial expectations for eight jurisdictions
on climate, four jurisdictions on other environmental issues,and two jurisdictions on social matters.

EMEA

INSIGHTS1MINIMUM CAPITAL REQUIREMENTS (INDICATOR 1.5.2)

Banks are expected to integrate E&S considerationsin their ICAAP in 11 jurisdictions in EMEA (mostly forclimate and the environment). In the Americas andAPAC, the expectations are less frequent for climate
and most are partial.

21 COUNTRIESThe integration of risk-based E&S considerations in the prudential rules
for banks such as capital and liquidity requirements, could contribute tostrengthening their risk management systems and ultimately their resilience
to climate-related or environmental shocks. The indicators related to therule-based micro-prudential supervision have scored the lowest in theentire assessment. Within this area, supervisors have a great opportunity
to improve and to set precedent for taking E&S risks into consideration incapital and liquidity management. The results clearly show that the financial
implications of E&S risks are not adequately understood and embedded.

Banks are expected to integrate E&S considerations in theirInternal Capital Adequacy Assessment Process (ICAAP).

APAC(RULE-BASED)INTEGRATING E&S INTO ICAAP (1.5.1)

12 COUNTRIESMICRO-PRUDENTIAL
SUPERVISION

9
9
1

20

1

20
21
1

11
12
12

No supervisors have communicated clear expectations on
taking E&S considerations into account in liquidity ratios.
Only four jurisdictions have defined partial expectations.

DISCLAIMER: The boundaries and names used on this map are indicative and do not imply official recognition by WWF

37

CENTRAL BANKS AND FINANCIAL SUPERVISORSINTERVIEW:
BANCO CENTRAL DO BRASIL (BCB)
Q1

What are BCB’s plans to foster a more sustainable,
green and resilient financial system in Brazil?

Since 2014, financial institutions in Brazil are required
to implement socio-environmental responsibility policies,
and since 2017, to integrate socio-environmental risks intheir risk management processes. In 2020, sustainability
was officially included in the BCB’s strategic agenda
with concrete measures across five pillars: regulation,
supervision, policy and instruments, partnerships, andinternal actions. BCB joined the NGFS in March 2020 and
was appointed to the NGFS’ Steering Committee in 2022.
In 2021, BCB published new regulations on the
management of Social, Environmental and Climate (SEC)
risks applicable to FIs and a sustainability criterion inrural credit, prohibiting credit to agents with illegal SEC
practices. BCB established the Green Bureau for Rural
Credit, a system that will expand the verification of SEC
criteria in financing rural producers. It acts as a secondline of defence, strengthening SEC regulation complianceand enhancing post-contract supervision of these rural
credit operations.

BCB is also working to estimate the effects of socioenvironmental risks in the economy and on the National
Financial System. The first climate risk evaluation exercise
was published in the Financial Stability Report (October2022) which consists of mapping credit exposure toborrowers’ transition risks and conducting sensitivity
analysis based on climate scenarios.
BCB is incorporating SEC variables into its decision-making
processes. BCB’s Report on SEC-Related Risks andOpportunities (RIS) addresses BCB’s sustainability actionsin an integrated way and strengthens the communicationon the set of rules, practices and projects of BCB that aim
to improve the management of SEC risks.

Q2

How is BCB deepening engagement with financial
institutions on deforestation and nature loss?
Does BCB intend to require financial institutions topublish transition plans integrating nature and climatechange?

BCB opted for a phased implementation of the TCFD
recommendations in the prudential framework of financial
institutions: qualitative aspects focusing on governance,
institutional strategy and risk management in 2021
(phase 1) and quantitative aspects on metrics, goals andmeasurement of climate risks by end of 2023 (phase 2).

All initiatives on BCB’s Sustainability Agenda were a resultof an open dialogue with FIs and the society, mainly
through public consultations. According to Brazilian
regulation, FIs are required to establish their own SEC
Responsibility Policy (PRSAC), which are principles andguidelines on SEC issues to be observed by the FIs on theirbusiness, activities, and relationship with stakeholders.
The PSRAC and its implementation must be disclosed
in line with the TCFD recommendations.

On monetary policy, sustainability criteria were introducedin the selection process of counterparties and on thestrategic asset allocation of international reserves.
Sustainable bonds have been part of BCB’s international
reserves portfolio since 2012 with the addition of new
green instruments.

Resolution BCB 140 also prohibits granting rural credit
to activities on preservation areas, properties withenvironmentally embargoed areas, indigenous and“quilombola” 56 lands. BCB plans to incorporate transition
plans into the prudential regulation when international
standards are developed.

© Shutterstock – Dan Koleska

38 | SUSREG ANNUAL REPORT 2022

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BANKING FINDINGS – BANKING SUPERVISION

1

1

7
14

EMEA
40 | SUSREG ANNUAL REPORT 2022

APAC

12 COUNTRIES

4

1
1

10
7

2

9

1

10

3

6

3

6

7

10

3

4

13

5

15
2

6
9

1
1

5
7

EXTERNAL ASSURANCE FOR DISCLOSURES (1.6.9)

8

3

Banks are expected to publicly disclose the share of their total
lending portfolio that is aligned with existing taxonomies in
57% of jurisdictions in EMEA, particularly in the EU region.
There are almost no such expectations in other jurisdictions.

9 COUNTRIES

9AMERICAS

12

9

EMEA

4

21 COUNTRIES

9 COUNTRIES

5

1

4

Banks are expected to seek external assurance for their E&S
public reporting and disclosures.

APAC

Banks are expected to publicly disclose the share of
their total lending portfolio that is aligned with existingclassification systems for sustainable or unsustainable
activities (taxonomies).

1

6

DISCLOSURE AGAINST TAXONOMY (INDICATOR 1.6.6)

12 COUNTRIES1

AMERICAS

1.6.2:	
The Financial Service Authority of Indonesia(OJK) in their No.51/POJK.03/2017 requires
banks to have Sustainable Finance Action Plan
which includes one year and five-year timelines,
and it must be submitted once every five years.
The plan should at least outline the priority activity
target for five years, success indicator of each activity,
and the allocation of resources (funding, human,and cooperation partner) for the implementation.
1.6.4: 	In their Sustainable Finance Framework,
the Bangko Sentral ng Pilipinas (BSP)
communicates their expectations that banks
should disclose their sustainability strategy
objectives, risk appetite, and risk management
system in the annual report.
1.6.6: 	According to the European Commission
regulation C (2021) 4987, credit institutions
should disclose their green asset ratio (GAR).
The GAR shall show the proportion of thecredit institution’s assets financing and invested
in taxonomy-aligned economic activities as
a proportion of total covered assets.
1.6.9: 	The Financial Service Authority of Indonesia(OJK) through POJK Number 51/POJK.03/
2017 recommends having a verification process
or assurance to improve the quality of information
presented in the sustainability reports. Thisassurance process is carried out by examining
documentary evidence and interviews to clarify
information conveyed in the report througha sample focused on material information.

11

EMEA



Transition plan: In 2021, the Carbon Disclosure
Project (CDP)’s Climate Change Questionnaire
received over 13,000 responses across 13 industries
and 117 countries and found that only a third
reported developing a low-carbon transition
plan which fell short in comprehensiveness whencompared to CDP.57
Climate transition plan assessment:
The CDP and French Environment and Energy
Management Agency (ADEME) founded theAssessing Low-Carbon Transition (ACT) initiative
to provide an independent assessment for climatetransition plans by enabling benchmarking against
advanced, science-based metrics.58
Pillar 3 reporting: The NGFS report on“Capturing risk differentials from climate-relatedrisks” states that considering climate-related andenvironmental risks as part of Pillar 3 (disclosure
requirements) could be beneficial given the generaluse of disclosures in facilitating measurement andmonitoring of these risks.59
Disclosures: Currently, the sustainability
disclosure requirements by the EU, the SEC andthe International Financial Reporting Standards(IFRS) are under review. Once published, theserequirements will increase the disclosure andassurance requirements and thus further highlightthe accountability of companies to identify, manage,
and report their E&S risk management procedures
and transition plans.

8

21 COUNTRIESGOOD PRACTICES

13

2

While 70% of all assessed jurisdictions include at least
a partial expectation around climate, environment and/or social matters (only 11% for full score), there is limited
disclosure on non-achieved targets and taken measures.
Such expectations are more mature for APAC and EMEA
than for the Americas (where no country scored a full
expectation).

APAC

INSIGHTS

7

9 COUNTRIES

7

AMERICAS

1

EMEA

1

7

21 COUNTRIES

3

APAC

5

12 COUNTRIES

9 COUNTRIESAMERICAS

1

Banks are expected to include information on their E&S
strategy and its implementation in their annual report,
including non-achieved targets and taken measures.

Expectations related to the disclosure of E&S transition plans
are included in 46% of all assessed jurisdictions, mostly as
partial expectations. It is more common for climate issues(60% of jurisdictions have at least partial expectations) thanfor social and environmental matters (43% of jurisdictions).

12 COUNTRIES

Public disclosure of material information on E&S risks and impacts by financial
and non-financial corporations is critical in helping to correct market failuresand enhance market discipline. It also contributes to better risk management
and facilitates the identification of sustainable finance opportunities.

DISCLOSURE IN ANNUAL REPORT (1.6.4)

Banks are expected to publicly disclose their time-boundtransition plans to reach set strategies and objectives
pertaining to E&S issues.

21 COUNTRIESDISCLOSURE&TRANSPARENCY

TIME-BOUND TRANSITION PLAN (1.6.2)

12

4

9

8

Expectations are not yet defined or communicated in theAmericas but in Europe, 12 assessed jurisdictions haveannounced either partial assurance requirements orrecommendations, and the same applies to four jurisdictionsin APAC.

DISCLAIMER: The boundaries and names used on this map are indicative and do not imply official recognition by WWF

41

BANKING FINDINGS – BANKING SUPERVISION

42 | SUSREG ANNUAL REPORT 2022

1

20
21
4

APAC

1

4

4
11
12

9 COUNTRIESAMERICAS

5

6

EMEA

10

7
9

21 COUNTRIES

5

1

9

10
21
21

3

APAC

6

1

12 COUNTRIES

912 COUNTRIESEMEA

21 COUNTRIES

9 COUNTRIESAMERICAS

6

The supervisor has published the aggregated results of its
stress testing exercise on material E&S risks, as well as its
recommendations.

1

8
12
12

The results of 17 climate-related stress tests have been
published by banking supervisors globally, with nine of themalso including recommendations. However, no supervisors
assessed have published stress testing results for social andenvironmental considerations as yet.

EXPOSURE LIMIT (INDICATOR 1.7.5)

SYSTEMIC E&S RISKS IN CAPITAL REQUIREMENTS (INDICATOR 1.7.6)

1

8

1

20

1

20

1

20
12
12
12

None of the assessed supervisors have issued prudential
rules related to limiting exposure to specific environmentally
harmful activities. Only two jurisdictions partially meet theindicator criteria, where initiatives have been announced but
are yet to come into force.

9 COUNTRIES

8AMERICAS

8

1

EMEA

1

21 COUNTRIES

9 COUNTRIESSpecific capital requirements for banks incorporate a macroprudential buffer for systemic E&S risks.

APAC

The supervisor has issued prudential rules to limit the
exposure of banks to certain activities, in order to preventand protect against the build-up of systemic risk, based on
E&S considerations.

12 COUNTRIES

1.7.1: 	Bank Negara Malaysia (BNM) publisheda study titled “An Exploration of NatureRelated Financial Risks in Malaysia”
assessing the exposure of Malaysian banks tosectors and regions that are highly vulnerable
to nature-related risks. Of the commercial loans
portfolio analysed, 54% are exposed to sectorsthat depend to a high extent on ecosystem services.
1.7.3: The European Central Bank (ECB) in their2022 climate risk stress test found that on
average, more than 60% of the financial institutions’interest income was derived from business with
non-financial corporate customers belonging to the
22 carbon-intensive sectors. Custodians and asset
managers, along with global systemically importantbanks (G-SIBs), were rather less reliant on income
from GHG-emitting sectors, while developmentbanks/promotional lenders and small domestic
retail lenders were the most reliant.
1.7.5: Banco do Brasil, in their new regulation63
requires monitoring of concentrations and,
when appropriate, establishment of limits for
significant exposures to economic sectors or
geographical regions that are most susceptible
to suffering or causing social, environmental
and climate-related damage.
1.7.6: In their updated supervisory ICAAP-ILAAPBMA Handbook, the Magyar Nemzeti Bank
(MNB) of Hungary stipulates the conditions
for the application of the green preferential
capital requirement, in which the total may notexceed 1.5% of the credit institution’s total risk
exposure amount (TREA) during the ICAAP
reviews initiated in or after 2022.

1

9AMERICASNature-related scenarios: The TNFD incooperation with the NGFS and other strategic
partners, has published a draft framework fornature-related scenario analysis. The TNFD proposes
constructing scenario analysis as a default aroundthe following two critical uncertainties: (a) natureloss and ability of the company to adapt and (b)alignment of market and non-market driving forces.60
Climate stress testing capacity: UNEP FI’s
Comprehensive Good Practice Guide to Climate
Stress Testing lists seven recommendations
for regulators to assist financial institutions:build institutional expertise, require mandatory
disclosures, implement policies on disclosing
required data in standardised formats, provide freeopen-source data, modify current system used torun models, design scenarios for supervisory climate
stress tests relevant to financial institutions’ scopeand business model, and initiate communication
between financial institutions and experts.61
Concentration limit: Quantitative portfolio
concentration limits, either absolute or relative, are oneof the potential instruments to address concentration
risks from climate and environmental risks. This limit
would be subject to supervisory reporting, disclosureor an additional capital buffer. In the event of a breachof the limit, a range of supervisory measures could
be considered, such as a mandatory notification inaccordance with the Large Exposures framework or
a deduction of the excess part of the concentrated
position from the bank’s capital.62

2

STRESS TESTING PUBLICATION (1.7.3)

Twenty two climate exposure assessments and two
assessments for environmental considerations have been
performed by supervisors around the world. No supervisory
assessments of banks’ exposure to material social risks havebeen conducted anywhere in the assessed jurisdictions yet.

EMEA



GOOD PRACTICES

21 COUNTRIESINSIGHTSThe supervisor has assessed the exposure of banks to material
E&S risks and the implications for financial system stability,
based on forward-looking scenario analysis and stress testing.

APAC

Focusing on the stability of the financial system as a whole, macro-prudential
supervision is critical in identifying system-wide imbalances in order to regulate
and mitigate these risks. Prudential regulations focus on preventive measures
as it is more efficient and less costly to mitigate issues than it is to deal withdamage control later, particularly in the case of climate change and nature loss.

SUPERVISOR’S STRESS TESTING (1.7.1)

12 COUNTRIESMACRO-PRUDENTIAL
SUPERVISION

9

1

20

2

10

Capital requirements for banks seldom incorporate a specificmacro-prudential buffer for systemic E&S risks with only
three assessed jurisdictions worldwide fully doing so.

43

BANKING FINDINGS – BANKING SUPERVISION44 | SUSREG ANNUAL REPORT 2022

4

13

1

4

11

9

10

11

2

8

2

2

7

1

3

3

8

9 COUNTRIESAMERICAS

7

2

4

1

2

6

1

2

6
9

EMEA

1

21 COUNTRIES

1

3

8

3 1

19
2

1

4
17

2

APAC

7

The supervisor has conducted studies to assess the banking
sector’s exposure to and management of E&S risks, andpublished its conclusions and recommendations.

12 COUNTRIES

9 COUNTRIESAMERICAS
EMEA

21 COUNTRIES

1

APAC

12 COUNTRIES2STUDY ON BANKING’S EXPOSURE (1.8.4)

5

5

2

9

1

11

Only 17% of supervisors in all jurisdictions have published
an official climate strategy or roadmap. About 55% of thesupervisors have issued a full or partial environmental
strategy, and 38% have issued a social strategy.

Supervisory studies of the banking sector’s exposure toclimate risks have been conducted in 29 jurisdictions,half of which are only partial studies that do not coverbanks’ management of such risks. Fewer studies have been
conducted on other environmental issues (10 jurisdictions)and social matters (six jurisdictions).

STUDY ON TRANSMISSION CHANNELS (1.8.7)

DATA QUALITY INITIATIVES (1.8.8)

8

1

8
6

4

11

2 1

18

2

19
2
2

1

4

6
10
11

Twelve jurisdictions have published transmission channel
studies related to climate risks, and another 11 jurisdictions
have either mentioned climate risk transmission channels
or announced the intention to perform such a study. Twosupervisors have published similar studies related to theenvironment and two supervisors on social matters.

9 COUNTRIES

1

AMERICAS

2EMEA

9 COUNTRIES

3

21 COUNTRIES

4

The supervisor actively supports initiatives to address E&S
data availability and quality issues, including through thepromotion of open-source solutions.

APAC

The supervisor has conducted and published studies toanalyse the transmission channels between E&S risks andthe economy and the financial system.

12 COUNTRIES

1.8.2: In Indonesia, the Financial Service
Authority (OJK) published the Sustainable
Finance Roadmap Phase II 2021 – 2025,
containing a detailed timeline up to 2025.
It consists of 7 components: policy, product,
market infrastructure, coordination among
ministries/institutions, non-government
support, human resources, and awareness.
1.8.4: 	The Australian Prudential Regulation
Authority (APRA) conducted a climatechange survey of 38 large entities. The survey
found that a majority of regulated entities weretaking steps to increase their understandingof climate risks and integrate it into their risk
management frameworks, one third viewed
climate risks as material, and more sophisticatedfinancial analysis of scenarios is gaining traction.
1.8.7: In 2021, the French Prudential Supervision
and Resolution Authority (ACPR) published
an initial assessment of the financial risks
caused by climate change. The paper describes
a pilot exercise with the objective to quantify thecomplex transition or physical risk scenarios, andto measure the risks and vulnerabilities to which
French financial institutions are exposed.
1.8.8: 	The Centre for Green and Sustainable
Finance (GSF Centre) in Hong Konglaunched the Data Source Repository in June
2022. The repository contains various government
data sources relevant to the physical risks
assessment, including historical data on catastrophe
damages, district-level microclimate conditions (suchas tropical cyclones, flooding, and landslides), as wellas geographic data and a coordinates transformation
tool. A free and publicly accessible greenhouse gas
emissions estimation tool that companies can use as
an alternative source of information is on the way.

6

1

AMERICASNature impact assessment: Central banks
and supervisors are encouraged to conduct impact
and dependency assessments on nature as well as
biodiversity-related scenario analysis and stresstests at the micro, the financial system, andregional levels, as well as identify priority driversof biodiversity-related financial risk. Further
analysis and quantification of physical and transition
risks arising from biodiversity losses and creating
a dashboard of biodiversity metrics to monitor thestate of biodiversity risks are also recommended.64
Reliance on nature: A growing number of central
banks and supervisors have started to grasp thereliance of their financial institutions on nature,with over 40% of assets often highlighted. Others
have started to signal that supervisory expectations
regarding environmental risk management extend
to biodiversity.65
Climate risk impact assessment: Existing
analyses focus on how specific climate risk drivers
can impact narrowly defined sectors of particular
economies, individual markets, or top-down
assessments of the macroeconomy as a whole.
Most studies do not model the efficacy of mitigants
or the propagation and potential amplificationof the impacts that climate risk drivers may haveacross the financial system.66
Open-data: The Climate Data Steering Committee
unveiled recommendations on the design of a new
open-data utility, the Net-Zero Data Public Utility(NZDPU). The Utility will include company andfinancial institution-level emission data, net-zerotargets and actions, and openly accessible statisticalclassification information.67 Financial institutions canalso collaborate with their local statistical bureaus toincrease the quality of climate and environment data
available such as the case in Norway.68

EMEA



GOOD PRACTICES

21 COUNTRIESINSIGHTS

1

APAC

The transition to a low-carbon, resilient and more equitable economy
requires ambitious action and leadership from banking regulators,
supervisors, and central banks. In order to properly integrate E&S
considerations into their activities, these institutions also need to developinternal capacity and expertise on these topics.

The supervisor has published an official E&S strategy orroadmap outlining a science-based transition plan withassociated measures for contributing to a net-zero andnature-positive financial centre to address E&S risks andopportunities in the financial sector, in line with its mandate.

12 COUNTRIESLEADERSHIP & INTERNALORGANISATIONSUPERVISOR’S E&S STRATEGY (1.8.2)

5

2

1

3

6

13

6

3

3

Thirteen banking supervisors are supporting E&S data
quality improvement initiatives and providing concrete
recommendations and proposed actions, mostly in theAmericas and APAC. Another 10 jurisdictions have declaredthemselves supportive, but have yet to provide any concreteplans or recommendations.

45

CENTRAL BANKS AND FINANCIAL SUPERVISORSINTERVIEW:
HONG KONG MONETARY AUTHORITY (HKMA)
Q1

How is HKMA planning to integrate climate,environmental and social considerations in
its activities and mandates?
HKMA intends to continue its focus on three broad areas: Banking supervisor – strengthen resilience of thesector against climate risks and accelerate efforts
in supporting transition. After finalising the supervisory
guidance in 2021, HKMA announced in June 2022
its two-year plan to integrate climate risk intobanking supervisory processes. HKMA is committed
to implementing TCFD recommendations in the
sector by 2025.
 Market facilitator – enhance Hong Kong’s ecosystem
and role as a regional sustainable finance hub. Since
the release of Green and Sustainable Finance CrossAgency Steering Group (CASG)’s strategic plan in 2020,
HKMA has been working on capacity building, data,taxonomy, climate-related disclosures, sustainability
reporting, and carbon market opportunities. HKMA is
also assisting the Government in issuing green bonds.
 Manager of exchange fund – ensure ESG considerations
are an integral part of the investment process throughintegration, active ownership and collaboration. HKMA’s
responsible investment journey commenced in 2016 andwas accelerated by ESG integration from 2017. HKMA willcontinue adhering to the guiding principle to give priority to
ESG investments with comparable long-term risk-adjusted
returns, and endeavours to align disclosures with TCFD
recommendations no later than 2025.

Q2

How is HKMA deepening engagement withfinancial institutions on deforestation andnature loss? Does HKMA intend to require financial
institutions to publish a transition plan integrating
nature and climate change?
HKMA monitors banks’ readiness in managing climate andenvironmental risks and efforts in supporting transition.

The “greenness assessment” in 2020 assessed certain
aspects of the management of environmental risks.
The supervisory guidance in 2021 outlines the
expectations regarding environmental and sustainabilityrelated issues, as well as potential downside of
misalignment with transition. HKMA has also sharedsound practices of leading banks to support transition.
HKMA will place a greater focus on nature-related risks
and transition in reviewing its “greenness assessment”
framework and is considering using the Supervisory
Review Process to incentivize banks to enhance theirframework to address risks related to climate change
and transition to carbon neutrality.

Q3

What are the main challenges that HKMA
is facing in the definition and implementationof its roadmap particularly in addressing natureloss and climate change risk? What would be needed
to overcome these?
To address data and talent limitations, the CASG’s Centre
for Green and Sustainable Finance Centre (GSF Centre)
launched three repositories on data sources, training
information and internship opportunities to facilitate
access to useful data and learning resources. Other
measures include planned launch of a training subsidy
scheme, developing banking qualification for sustainablefinance, working with government departments andthe industry to make available physical risk data, etc.

Q4

Has HKMA formed or plan to form any external
partnership to support the implementation ofthis roadmap?
Apart from the work in international forums, the CASG
and GSF Centre, HKMA launched the Alliance for Green
Commercial Banks with the IFC to bring together thegreen finance community, act as a knowledge hub
and one-stop learning platform, facilitate investment
for green business opportunities and deploy advisory
support for green transformation.

© Shutterstock – kokrabue

46 | SUSREG ANNUAL REPORT 2022

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BANKING FINDINGSCENTRAL BANKING© Shutterstock – Super Prin48 | SUSREG ANNUAL REPORT 2022

49

BANKING FINDINGS – CENTRAL BANKING

50 | SUSREG ANNUAL REPORT 2022

7

11

9

11

1

APAC

10

2

10

2

10

2

9 COUNTRIESAMERICAS
EMEA

2

1

21 COUNTRIES

2

5 1

7

2

7

2

7

2

8

2 1
1 1

7

10

8

11

8

3

APAC

7

12 COUNTRIES

9 COUNTRIESAMERICAS

212 COUNTRIESEMEA

21 COUNTRIES

7

9

1

11
12

Overall, only three central banks (all in EMEA) are taking
E&S matters into consideration in their corporate asset
purchase programs. In 15 jurisdictions, there are no
applicable expectations as their central bank does not have a
corporate asset purchase program.

Central bank collateral frameworks rarely include E&S
considerations, and just nine central banks (all in EMEA andAPAC) currently have some sort of expectation in this area.

FOREIGN EXCHANGE RESERVES (2.1.3)

SUBSIDISED AND TARGETED LOANS (2.1.4)

5

2

6

2

9

12

7 1

13

5 1

15

2

8

1

5
2

2
6
9

Around 31% assessed central banks have integrated climate
considerations into the management of their foreignexchange reserves portfolio accompanied by specific criteria
and/or standards used. Additionally, 19% of central banks
also do so but with limited information on the criteria
applied. For environmental and social matters, about 30% of
central banks have disclosed a form of policy to integrate E&S
considerations.

9 COUNTRIES

2

AMERICAS

2

EMEA

5

21 COUNTRIES

9 COUNTRIES

2
1

1

The central bank offers subsidised loans or preferential
targeted refinancing lines based on E&S considerations.

APAC

The central bank integrates E&S considerations in the
management of its foreign exchange reserves portfolio.

12 COUNTRIES

2.1.1: 	In a press release by the European
Central Bank (ECB) in July 2022,74 the Bank
communicated that the Eurosystem aims togradually decarbonise its corporate bond holdings
amounting to EUR 344 billion, on a path alignedwith the goals of the Paris Agreement. To that
end, the Eurosystem will tilt these holdings
towards issuers with better climate performance.
Better climate performance will be measured
with reference to lower GHG emissions, more
ambitious carbon reduction targets, and betterclimate-related disclosures.
2.1.2: 	Through “case-by-case and in-depth examinations”
of the quantitatively assessed companies, Banquede France evaluates the creditworthiness ofcorporations as part of their collateral framework.
This qualitative assessment provides informationthat flows into the second stage of the evaluation,such as insights into the company’s social andenvironmental impact.75
2.1.3: 	De Nederlandsche Bank as a signatoryof the Principles for Responsible
Investment (PRI) applies the PRI pillars
and integrates ESG considerations in managing
its own funds and foreign reserves portfolios.
2.1.4: 	Bank Negara Malaysia recently launchedthe Low Carbon Transition Facility(LCTF), an RM1 billion financing facility which
encourages SMEs to enhance business resiliencethrough adopting sustainable practices whereby
participating financial institutions will matchthe LCTF with RM1 billion of their own funds.76
This includes improving energy efficiency, increasing
the use of sustainable material for production
and obtaining sustainability certification.

2

11

AMERICAS

Monetary policy: The NGFS presents some
options that central banks can utilise to include E&S
considerations in monetary policy such as negativeand positive screening, tilting purchases (asset
purchases to be tilted towards better-performing
issuers or assets on E&S), adjusting haircuts, andaligning collateral pools to E&S oriented objectives.70
Collateral framework: In the Eurosystem,
national central banks’ In-house Credit Assessment
System (ICAS) is highly suitable for climate andenvironmental (C&E) risk integration. The ICAS
assessment is a potentially less biased and moreconsistent source than that by the private-sector
ESG providers. In particular, the ICAS assessment
could serve as a credible, neutral, and free resourceof C&E risk assessment for a large number of small
and medium enterprises.71
Greening corporate portfolio: Civil societies
issue criteria for greening central bank corporate
portfolio: exclude most climate-harmful assets,
rapid and visible change in sectoral weightings
along with measurable reduction in carbon
footprint (prioritise climate neutrality over market
neutrality), targets and performance of participatingcompanies must align with the 1.5°C target andbacked with science-based plans, and make climaterelated disclosures a mandatory requirement forcorporate purchase programmes aligned with theprospective Corporate Sustainability Reporting
Directive.72
Targeted credit policy: To promote a green
targeted credit policy, central banks may green theirterm funding scheme through pilot programmessuch as energy-efficient building retrofits in the UK
and other green projects.73

7

7

EMEA



GOOD PRACTICESThe central bank takes E&S considerations into account in its
collateral framework.

2 1

21 COUNTRIESINSIGHTSAPAC

There is emerging discussion on the link between E&S risks and monetary
policy. Physical risk incidents such as extreme weather events result in
supply shocks, increased prices and lower outputs which lead to inflationthat worsens long-term macroeconomic volatility. Further domino effects
could lead to demand shocks and weakening the overall influence or effectof monetary policy.69

COLLATERAL FRAMEWORK (2.1.2)

The central bank takes E&S considerations into accountwhen implementing corporate asset purchase programs.

12 COUNTRIESMONETARY POLICYCORPORATE ASSET PURCHASE PROGRAMS (2.1.1)

7

2

7

2

7

2

1

10

10

1

10

10

11

10

2
1
1

1

2

7

1

9

1

10

1

Central banks offer subsidised loans based on climate
considerations in two APAC jurisdictions. Three additional
jurisdictions in APAC and EMEA have this mechanism inplace but only for a limited number of underlying sectors/
activities and/or with limited details on the criteria andstandards used.

51

CENTRAL BANKS AND FINANCIAL SUPERVISORSINTERVIEW:
DEUTSCHE BUNDESBANK
Q1

What are Bundesbank’s current plans tofoster a more sustainable, green and resilient
financial system?

The implications of climate change and climate policy
affect almost all Bundesbank’s core tasks: price stability
and financial stability, banking supervision, portfolio
management as well as internal business operations.
The Bundesbank is aware of its responsibility and it
contributes to climate protection within the scope of
its mandate and aims at playing a part in boosting market
transparency around the financial implications and risksof climate change. We strive to act as a catalyst for asustainable change in the financial system and are actively
involved in implementing the Eurosystem’s action plan
to incorporate climate change considerations into its
monetary policy framework.

Q2

How is the Bundesbank planning to integrate
climate, environmental and/or social
considerations in its activities and mandates?
The Bundesbank ensures that financial institutions
adequately consider sustainability-related financial
risks and it performs financial stability analyses togauge the vulnerability of the German financial system.
Climate-related economic research also features
prominently in the Bundesbank’s research programme.
In order to fulfil sustainability-related data needs, theBundesbank established the Sustainable Finance Data Hub.
The Bundesbank successfully completed the procurementof climate-related data for the European System of Central
Banks (ESCB), and contributed to establishing the NGFS
climate data directory – a catalogue of currently over
700 available climate-related data sources for financialsector stakeholders to use.

The Bundesbank is reducing its carbon footprint by cutting
GHG emissions in its operations and considering climate
aspects when investing its own portfolio. Since 2015, theBundesbank has published an annual environmental reportand recently published its first climate-related report basedon the TCFD recommendations.
The Bundesbank has built up capacities in all relevant areas
in recent years to continually and swiftly strengthen its work
and its analytical capabilities on climate change and climatechange policy. A Steering Committee for Green Finance wasestablished to coordinate and guide the work program inthis area within the Bank, in close dialogue with the Executive
Board. A green finance expert group also facilitates regularexpert-level interaction and dialogue across the Bank.

Q3

Has the Bundesbank formed or are planningto form any external partnership to support
the implementation of this plan?
As a member of the Eurosystem, the Bundesbank is working
with national central banks and the ECB to incorporate
climate change considerations in the Eurosystem’s monetary
policy framework and to analyse financial stability issues.
The Bundesbank is collaborating within the new BIS
Innovation Hub for the Eurosystem to develop novel
applications to analyse climate-related disclosures and is
involved in the ongoing work of the Financial Stability Board(FSB) to address climate-related risks where Bundesbank
Vice-President Prof Claudia Buch chairs an FSB working
group on climate vulnerabilities and data.
The Bundesbank is a founding member of the NGFS andcontributes to the various work streams. Our Executive
Board Member Dr Sabine Mauderer currently serves as
Vice-Chair of the NGFS and will become Chair in 2024,
playing a key role in guiding the network’s strategic focus.

© Unsplash – Julian Hochgesang

52 | SUSREG ANNUAL REPORT 2022

53

BANKING FINDINGS – CENTRAL BANKING

54 | SUSREG ANNUAL REPORT 2022

2

3

1

16

3

16 1

2

APAC

12 COUNTRIES

13

2

8

1

11

1

9

2

9 COUNTRIESAMERICASEMEA

521 COUNTRIESEMEA

21 COUNTRIES

3

5

2

1

1

7

1

1

7
6

10

3

5

7

1

11

6

14

4

APAC

9

2

12 COUNTRIES

9 COUNTRIESAMERICAS

9

4
2

3

2

7

1

4

1

6

2

TCFD DISCLOSURE (2.2.4)

ASSET MANAGEMENT (2.2.7)

5

9

3

1

7

8

The central bank publishes regular TCFD reports in ninejurisdictions assessed. An additional 11 central banks havesignalled their intention to initiate TCFD reporting soon.
Twenty-two central banks have not yet announced any plans
to follow TCFD recommendations.

9 COUNTRIESAMERICAS

7

2

5

1

1

2

5

1

6

1

2
13

EMEA

1

1

21 COUNTRIES

9 COUNTRIES

1

The central bank integrates E&S considerations in its asset
management practices (for its own, pension and thirdparty portfolios as applicable).

APAC

The central bank regularly reports publicly on its exposure toand management of climate-related risks and opportunities,
along with the TCFD recommendations.

12 COUNTRIES

2.2.2: 	
Banco de Portugal (BdP) is not only
committed to the dimensions of sustainability
directly related to its specific role as central bank
– macroeconomic and financial sustainability– but also to ESG sustainability. BdP commits
to aligning its own activities with the Paris
Agreement 1.5℃ trajectory and the EU goals
for climate neutrality.
2.2.3: 	Risks from climate change and the transition
to a net-zero economy continue to be a strategic
priority for the Bank of England (BoE). The
BoE addresses these challenges actively throughambitious climate work programs covering both
external policy functions and its own internal
operations. This includes the development of climate
scenarios for use by central banks and supervisorsand publishing a roadmap for mandatory climate
disclosure requirements in the UK.
2.2.4: 	
The Banco Central do Brasil and the Bankof England are among the central banks that
already publish TCFD-aligned disclosures.
The Eurosystem aims to start making annual
climate-related disclosures mandatory within thenext two years, using the recommendations of the
TCFD as the initial framework and reporting, asa minimum, in the category of metrics and targets.
2.2.7: 	Sveriges Riksbank of Sweden only purchases
assets that comply with international standards
and norms for sustainability. The Riksbank alsomeasures and reports the carbon footprint of
their corporate bond portfolio to promote themeasurement, compilation, and reporting ofclimate pollutant factors in general.

8

The central banks in 12 jurisdictions have published a clear
official climate strategy for a net-zero financial centre. Eightjurisdictions published a clear environmental strategy andfour jurisdictions have also published a clear social strategy.

AMERICAS

Net-zero for central banks: The NGFS
workstream provides a collective forum for NGFS
central banks to discuss issues and approaches
related to (i) sustainable and responsible
investment, (ii) central banks’ own climate-related
and environmental disclosure, as well as (iii) thegreening of central banks’ corporate operations.77
Climate disclosure for central banks:
The NGFS Guide on Climate-related Disclosure
for Central Banks has three broad recommendations:(i) disclose governance structures for monetary
policy, asset management, financial stability,
and internal operations; (ii) disclose strategies
for identifying and assessing the inward andoutward impacts of climate-related risks (including
describing material risks, adaptation of areas andfunctions, changes to operational frameworks, andcapacity building strategies); (iii) disclose climaterelated risks, use of data, sources, limitations andtarget setting.78
Reserve asset management: The OMFIF
Global Public Investor Survey 2021-22 foundthat the proportion of reserve managers who do
not implement ESG criteria in their investment
approach is falling, from over 50% in 2020 to
43% in 2022. However, more than 60% citelack of data as a major issue, compared to lessthan 50% in 2022.79

1

The central bank has published an official strategy orroadmap, a science-based transition plan with associatedmeasures for designing a net-zero and nature-positive
financial centre, in line with its mandate.

Central banks have defined nominal climate anchor as partof their objectives in 13 jurisdictions. Broader environmental
objectives are set by only six central banks. Social considerations
are included in the main objectives of only five central banks.

EMEA



GOOD PRACTICES

21 COUNTRIESINSIGHTSAPAC

The transition to a low-carbon, resilient, and more equitable economy
requires ambitious action and leadership from central banks. To properly
integrate environmental and social considerations into their activities, these
institutions must also develop internal capacity and expertise on these topics.

CENTRAL BANK’S E&S STRATEGY (2.2.3)

The central bank has defined science-based, climate andenvironmental-related nominal anchors as objectives
beyond conventional ones (e.g., relating to price stability,
full employment).

12 COUNTRIESLEADERSHIP & INTERNALORGANISATIONNOMINAL ANCHORS (2.2.2)

2

3

1
1

3
2

8

12

9

12

9
7
8
9

Around 16 central banks fully integrate climate
considerations in its asset management practices. In EMEA,
around 12 of the assessed central banks also include somesocial and environmental aspects in their asset management,
whilst this is rarely the case in APAC and the Americas.

55

BANKING FINDINGS – ENABLING ENVIRONMENT



13

8

12
2

9

4

2

7

3

8

10 COUNTRIESAMERICAS

2

7

1

2

7

1

12 1

8

6

15

5

16
5

7

1

1

6

5

1

1

6

5

1

Non-financial climate reporting is required in all 12 EU
jurisdictions (NFRD, to be replaced by more stringent
CSRD), in three jurisdictions in the Americas (the US
Securities and Exchange Commission’s proposed climate
disclosures are currently under review in the USA) andin five jurisdictions in APAC. The requirements andexpectations related to E&S reporting are lower.

CARBON PRICING (3.1.7)

NATIONAL-LEVEL SUSTAINABILITY STRATEGY (3.1.8)

AMERICAS

13

1

EMEA

8

6

21 COUNTRIES

EMEA
APAC

13 COUNTRIES

12 1

APAC

9

13 COUNTRIES

7

21 COUNTRIES

10 COUNTRIESAMERICAS

2

1

17 1

5

6

3

2

A carbon pricing mechanism is implemented in 29 of the 44
assessed jurisdictions (66%). There is a voluntary carbon
pricing system, a pilot system, or a limited system in place
for an additional nine jurisdictions, leaving six jurisdictionsin EMEA and APAC without any known plans to implement
carbon pricing.

10 COUNTRIES

1

1

5

5

4

5

1

8
10

EMEA

2

1

21 COUNTRIES

7

There is a national-level sustainability strategy, andfinancial institutions are encouraged to make and adhere
to net-zero transition plans.

APAC

10 COUNTRIES

A carbon pricing mechanism is being implemented in the
country.

13 COUNTRIES

3.1.3: 	The EU taxonomy provides companies,
investors, and policymakers with definitions
for which economic activities can be consideredenvironmentally sustainable. The first delegated
act on sustainable activities for climate change
adaptation and mitigation objectives was
published in the Official Journal in December
2021 and has been applicable since January
2022. A second delegated act for the remaining
objectives will be published in 2022. EU
Taxonomy needs to be science-based to minimise
greenwashing and influence capital flows with
the intended impact.
3.1.5: 	The government of New Zealand has
passed legislation making climate-related
disclosures mandatory for 200 organisations.
The requirement will apply to large publicly listedcompanies, insurers, banks, non-bank deposit
takers, and investment managers.
3.1.7: 	The Korea Emission Trading Scheme(K-ETS) began in January 2015 making
Korea the second nation in Asia to introduce
a nationwide cap-and-trade program. Throughthe scheme, the government aims to reducegreenhouse gas emissions by 37% below theBAU levels by 2030.
3.1.8: 	
Germany’s National Sustainable
Development Strategy is aligned with the
UN SDGs and focuses more than previous strategies
on sustainability as a global responsibility.
The Sustainable Finance Strategy is focusedon financial market policy and regulation where
sustainability risks are also acknowledged as
investment risks.

1

3

AMERICAS



Taxonomy development: Urgent action isneeded to include nature-related aspects andcritical supply chain considerations into existingand developing sustainable finance taxonomies.
Governments should explicitly include forwardlooking criteria within their sustainable financetaxonomy, thereby setting science-based targets
at global, regional, country, ecosystems, sector,
and company levels.80
Data requirement in disclosure: Disclosure
frameworks such as the TNFD and ISSB should
include recommendations for the minimum amountof data required, and steps to address risks in theabsence of data, including use of global datasets
or investing in data collation efforts.81
Carbon price: To complement domestic policies,
the International Monetary Fund (IMF) staff
proposed for an international carbon price floor
agreement that called for the world’s largest
emitters to pay a minimum price of $25-$75 per
ton of carbon depending on their national income
level ($25 for low-income countries, $50 for
middle-income countries, and $75 for high-income
countries).82
Transition strategy: The Glasgow Financial
Alliance for Net Zero (GFANZ) issued a Callto Action to G20 governments to close the gap
between their climate commitments and policies
through their own transition planning and reformof the international financial architecture.83

7

EMEA



GOOD PRACTICES

221 COUNTRIESINSIGHTS

1

Non-financial corporations are required to report on current
and planned activities according to internationally or
nationally recognised sustainability reporting standards anddefinitions.

A taxonomy of sustainable activities in relation to climate
is in place for all EU jurisdictions assessed due to the EU
Taxonomy. It is also in place in two jurisdictions in APAC
and one country in the Americas. There are draft or nonscience-based taxonomies related to the environment in 18
jurisdictions, with the EU block represented in the ‘draft’
category due to the planned extensions of the EU Taxonomy
to include environmental and social matters.

APAC

This section covers measures that are not necessarily within the mandates ofcentral banks and financial supervisors, such as multi-stakeholder initiatives,taxonomies, or carbon pricing mechanisms. These measures are key to facilitating
the adoption of sustainable finance principles by banks and more generally
to contribute to the alignment of financial flows with global sustainability
goals. This enabling environment section is also applicable to insurance.

A classification system for sustainable activities (taxonomy)
is in place and has been developed following a science-based
and multi-stakeholder process.

13 COUNTRIESENABLING ENVIRONMENTCORPORATIONS’ SUSTAINABILITY REPORTING (3.1.5)

TAXONOMY (3.1.3)

5
4

9
8

8

4

13

5

8

1
1

2

12
1

11

Almost all jurisdictions have a national-level strategy related
to climate, although only 20 explicitly include the financial
sector in their climate strategy. Thirty-one jurisdictions
have national environmental strategies and 12 have national
strategies on social matters, but most jurisdictions do not
specifically mandate financial institutions in their E&S
strategies, and are hence given a partial score.

Note: This chapter is common for banking and insurance thus Bermuda and Taiwan are also included, totalling the jurisdictions assessed in this section to 44.

56 | SUSREG ANNUAL REPORT 2022

57

CENTRAL BANKS AND FINANCIAL SUPERVISORSINTERVIEW:
RESERVE BANK OF INDIA (RBI)
Q1

What are RBI’s plans to foster a more sustainable
and resilient financial system in India?

The RBI is committed to foster a more sustainable
and resilient financial system in India and has set up
a Sustainable Finance Group (SFG) in May 2021 in the
Department of Regulation to lead its initiatives in thearea of climate risk and sustainable finance. The SFG
is instrumental in suggesting strategies and evolving
a regulatory framework, including climate-related financial
disclosures, which will be prescribed for its regulated
entities (REs) to propagate sustainable practices andmitigate climate-related risks.
Climate-related financial risks do have implications on
the safety and soundness of individual REs as well as
financial stability. Thus, there is a need for REs to develop
and implement a sound process for understanding andassessing the potential impact of climate-related financial
risks in their business strategy and operations. This will
require, among other things, an appropriate governancestructure and a strategic framework to effectively manage
and address these risks. Accordingly, a Discussion Paper
on Climate Risk and Sustainable Finance covering the above
aspects was released on July 27, 2022 for comments from
REs and other stakeholders. The results of a Survey on
Climate Risk and Sustainable Finance undertaken in January2022 to assess the approach, level of preparedness, andprogress made by leading scheduled commercial banks
in managing climate risk was also released on July 27, 2022.
The feedback from this exercise will help in shaping theregulatory and supervisory approach of the RBI on climate
risk and sustainable finance.

Q2

Following the publication of ‘discussion paper(and survey) on climate risk and sustainablefinance’, what are RBI’s immediate priorities tofacilitate the uptake of sustainable finance in India?
The RBI’s Discussion Paper and results of Survey on
Climate Risk and Sustainable Finance have been
received very positively across a cross-section of REs andstakeholders. We have also received very useful commentson the Discussion Paper. The same is being examined andwe will be coming out with regulatory guidance/framework
on climate risk and sustainable finance for the REs.
While doing so we will also be taking into account the‘Principles for the Effective Management and Supervisionof Climate-related Financial Risks’ published by the BCBS
in June 2022 which are aimed at improving both banks’risk management and supervisors’ practices related tothe above-mentioned risks.

Q3

With nature-related financial risks being
increasingly recognized by central banks acrossthe world, what are RBI’s views and plans to addressthese risks within its mandate?
In March 2022 the NGFS published a Statement on Naturerelated financial risks which acknowledges that naturerelated risks, including those associated with biodiversity
loss, has significant macroeconomic implications, andthat failure to account for, mitigate, and adapt to these
implications is a source of risk relevant for financial
stability. The NGFS was also of the view that nature-related
financial risks should be considered by central banks andsupervisors for the fulfilment of their mandates and has
created a task force to mainstream the consideration ofthese risks across its various work streams in the coming
years. As a member of the NGFS, the Reserve Bank of India
is also looking at improving its understanding of naturerelated financial risks to foster a more sustainable andresilient financial system in India.

© Shutterstock – nico99

58 | SUSREG ANNUAL REPORT 2022

59

INSURANCE FINDINGSINSURANCE
SUPERVISION© Shutterstock – Worraket

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61

INSURANCE FINDINGS – INSURANCE SUPERVISIONNORWAYSWEDENNETHERLANDSCANADA

DENMARKUNITED KINGDOMGERMANYLUXEMBOURG
EUROPEAN UNIONNEW YORK STATEUSAPORTUGALFRANCEHUNGARYSWITZERLAND
JAPAN

SPAIN
ITALY

CALIFORNIA STATEGREECECHINA

MOROCCOBERMUDASOUTH KOREA
UAE

MEXICOTAIWANINDIA

HONG KONG

THAILAND

PHILLIPINESCOSTA RICAMICROPRUDENTIAL
SUPERVISION

COLOMBIAKENYA

MALAYSIAINDONESIA
BRAZIL

AUSTRALIA
CHILE
SOUTH AFRICA

INSIGHTS(SUPERVISORY EXPECTATIONS)This section examines expectations towards insurers on the integrationof E&S considerations in their business strategy, governance, decisionmaking, disclosure and risk management policies and processes. It refers
to regulations, supervisory expectations or guidelines (issued either by
the regulator, supervisor or by the national insurance association) thatpertain to sustainable insurance practices.

62 | SUSREG ANNUAL REPORT 2022

SINGAPORE

E&S impact on insurance: Though climatechange is a source of financial risk for both
insurers and banks, they reflect differently on theirrespective balance sheets. Bank deposits (liabilities)
are not a direct function of climate risk, and bankvaluation is mainly determined by accounting.
In contrast, the liabilities of insurers (their reserves)
can be heavily impacted by climate change, inparticular for non-life insurance, and regulators
having a greater impact on valuation.84
Risk-based pricing signals: As an assessor,
manager, and carrier of risk and as a major
institutional investor, the insurance sector plays
a crucial part in the management of climaterelated risks. Insurers are particularly qualified tounderstand the pricing of risks. Notably, insurers
send important economic signals about the changing
risk environment through their risk-based pricing.85

NEW ZEALAND

REGULATIONS OR SUPERVISORY EXPECTATIONS (1.1.0)

The principle-based regulations or supervisory
expectations related to sustainable insurance whichhave been issued are applicable to all supervised insurers.

Regulations or expectations have been issued by 62% of thejurisdictions assessed. Seven jurisdictions do not have any
supervisory expectations in place, and EMEA is the region
with the highest coverage with 17 jurisdictions.

63

INSURANCE FINDINGS – INSURANCE SUPERVISIONMICRO-PRUDENTIAL SUPERVISION (SUPERVISORY EXPECTATIONS)SCOPE & IMPLEMENTATION

E&S TOPICAL SCOPE (1.1.1)

The regulations or supervisory expectations cover a broad range of environmental and social (E&S) issues.

Out of the 42 assessed jurisdictions, 14 clearly include all three E&S topics (climate, environment and social
issues) in their guidelines and expectations. The other jurisdictions are either not considering all three issues
or are only partially addressing them.

NORWAYCANADASWEDENDENMARKUNITED KINGDOMNETHERLANDSGERMANYHUNGARYLUXEMBOURG

FRANCEEUROPEAN UNIONNEW YORK STATEUSAPORTUGALSPAIN

SWITZERLAND
JAPAN

ITALY
GREECECALIFORNIA STATE

CHINA

MOROCCOBERMUDASOUTH KOREA
UAE

MEXICOTAIWANINDIA

HONG KONG

THAILAND

PHILLIPINESCOSTA RICA

MALAYSIA

COLOMBIAKENYA

SINGAPORE
INDONESIA

Regulations issued by financial
supervisors require accountability andaction, supported by the enforceabilityof those expectations and subsequent
supervision. With the interrelation
between climate change and natureloss made clear, it is imperative that thesupervisory expectations and regulations
should encompass not just climate issues
but also E&S issues hand-in-hand.
64 | SUSREG ANNUAL REPORT 2022

BRAZIL

CHILE

6
5
4
3
2
1
0

AUSTRALIA

SOUTH AFRICA

6
5
4
3
2
1
0

The colours in the map represent the aggregate score of indicator
1.1.1 of each jurisdiction in their climate, environment and social risks
coverage. A ‘fully met’ score is given 2 points, ‘partially met’ is given
1 point and ‘not met’ is given 0 points. For example, if a jurisdiction
has a fully met score on climate, a partially met score on environment,
and does not meet the social criteria, a total of 3 points is given.

NEW ZEALAND

65

INSURANCE FINDINGS – INSURANCE SUPERVISIONMICRO-PRUDENTIAL SUPERVISION (SUPERVISORY EXPECTATIONS)INSIGHTSGOOD PRACTICES

Double role: The insurance sector plays a double
role in the financial system as an institutional
investor on the asset side and the risk carrier/manager for their customers on the liability side.
This puts the insurance sector under higher
exposure to E&S risk from both sides (e.g., higher
volume of insurance claims due to climate change
and concurrent depreciation of investments),
underscoring the need for integrating E&S risks
in its asset-liability management.
Pricing biodiversity: The G20 Sustainable
Finance Roadmap emphasised the importance ofincorporating nature and biodiversity into ongoingsustainable finance efforts. Underestimating or
incorrectly pricing biodiversity-related risks could
pose a threat to the solvency of the insurance
industry and lead to an increase in uninsurable
risks. Combining the outcomes of catastrophe andclimate risk models is key to risk management, butmore work needs to be done to include biodiversity
risk. Incorporating ecological action with financial
protection makes the most economic and financial
sense and aids in resolving pricing issues in relatedrisks such as wildfires.86

1.1.2:	
From August 2022 and in line with the updated
EU Directive 138/2009/EC (Solvency II
Directive), insurers in the EU are required toalso consider how their asset portfolios affect theclimate. For insurers’ underwriting activities,
impact considerations are indirectly encouraged
through the EU Taxonomy Regulation (which setsstringent criteria for underwriting activities to beconsidered aligned with the Taxonomy’s climate
adaptation objectives) and through the conceptof ‘impact underwriting’, which has been promoted
by European Insurance and Occupational Pensions
Authority (EIOPA) for insurers to apply on
a voluntary basis.
1.1.2: Bermuda Monetary Authority (BMA)’s
proposed Guidance Notes on Managementof Climate Change Risks for Commercial
Insurers focused on how climate change impacts
risks that are transferred to insurers and expect
insurers to consider their own external impact
on climate change (‘double materiality’) as it may
also revert back and affect in short, mid, or longterm their own financial performance, reputationand operations and, by extension, the financial
soundness of the sector as a whole.

DOUBLE MATERIALITY ASSESSMENT (1.1.2)

The regulations or supervisory expectations reflect both the expected impact of E&S issues on the insurer’s risks
and value creation, and the impacts of the insurer’s activities on E&S issues (’double materiality assessment’).

AMERICAS 10 COUNTRIESEMEA 19 COUNTRIESAPAC 13 COUNTRIES

2

4

4
12

1
3

4
6

3
4

Supervisory expectations on double materiality (i.e., covering both risks for the company and impacts for society) are fullyreflected in 17 jurisdictions (i.e., 40% of all countries assessed, with most of them in EMEA). Including partial expectations,
74% of the jurisdictions’ supervisors reflect some double materiality considerations.

© Shutterstock – Kenny Tong

66 | SUSREG ANNUAL REPORT 2022

67

INSURANCE FINDINGS – INSURANCE SUPERVISIONMICRO-PRUDENTIAL SUPERVISION (SUPERVISORY EXPECTATIONS)STRATEGY & GOVERNANCE







68 | SUSREG ANNUAL REPORT 2022

5

INVESTMENT

4

2

3

3

4

3

3

4

UNDERWRITING

14

4 1

12

4

3

12

4

3

14

4

12

4

3

12

4

3

6

4
2

4 1

3

1

6

2

1

7

2

1

7

2

17

1 1

17

1 1

17
5
3
2

1

2

6

1

9
10

The expectation for insurers to provide information totheir boards on the implementation of their E&S strategy
implementation is fully applicable in only about 17% of thejurisdictions assessed. A majority of the jurisdictions haveno explicit supervisory expectations in this area.

3
6

3

8

4

6

4

10 COUNTRIES

2

AMERICAS

3

EMEA

5

19 COUNTRIES

2

3

APAC

3

13 COUNTRIESUNDERWRITINGAMERICAS3

4

2

Insurers are expected to regularly provide their board
with relevant information related to the implementationof their E&S strategy.

3

EMEA

1.2.1: 	In the US State of New York, the Departmentof Financial Services (DFS)’ Guidance for
New York Domestic Insurers on Managing
the Financial Risks from Climate Change
requires each insurer to take a proportionate
approach to managing climate risks that reflects
its exposure to climate risks and the nature,scale, and complexity of its business. All insurers,
regardless of size, are expected to analyse theirclimate risks on both the underwriting andinvestment sides of their balance sheets.
1.2.1: 	In their Guidance Notes on Managementof Climate Change Risks for Commercial
Insurers published for consultation in August
2022, the Bermuda Monetary Authority statesthat the board should have clearly documented
responsibilities for managing climate change risks
and that an insurer’s approach to strategy setting,governance and oversight should expressly consider
the transversal character and the long-term natureof climate risk and address all relevant risk areas.
1.2.4: 	In Australia, APRA’s Prudential Practice
Guide CPG 229 Climate Change Financial
Risk requires financial institutions (including
insurers) to establish procedures to routinely
provide relevant information on their material
climate risk exposures, including monitoringand mitigation actions, to the board and senior
management.

4

INVESTMENT

Customer priority: In a survey, 36% of global
insurers mentioned that customers are their top
priority when they are formulating their ESG strategy,
followed by regulators (26%) and shareholders.87
Integrating underwriting and investment
assessments: Under the auspices of the UNEP
Principles for Sustainable Insurance Initiative,
leading insurers and reinsurers have been piloting
methodologies to implement TCFD recommendations.
The UNEP FI report recognises that the insurance
industry needs to assess climate change risks in
an integrated manner, not only at an underwritinglevel but also in terms of its investments.88
Scenario-based frameworks: A major opportunity
going forward is to deepen the connection between
scenario-based climate risk assessment frameworks
and tools and the design of insurance products,
including insurance policy terms and conditions.89
Physical, transition and litigation risks:
Other key opportunities going forward include(a) more detailed scenario-based assessments ofdownside risks and upside opportunities acrossinsurance lines and geographies, (b) a deeper,
quantitative assessment of litigation risks, (c) further
explorations aimed at integrating physical, transitionand litigation risks into one climate risk assessment
framework for insurance portfolios, and (d) assessing
the potential impact of climate-related risks andopportunities—including net-zero emission targets—on both insurance and investment portfolios.90
Metrics: Insurers’ chief sustainability officers
need to be empowered and will need more tangible
metrics, particularly relating to risk-adjusted returnon investment when climate risk is adequately
addressed, to gain support among functionaland business line leaders.91

UNDERWRITINGGOOD PRACTICESBOARD COMMUNICATION (1.2.4)

Insurers are expected to integrate E&S considerations intheir business and risk strategy, consistent with the size
and nature of their operations.

APAC

INSIGHTS

BUSINESS AND RISK STRATEGY (1.2.1)

INVESTMENT

Insurers should be expected to consider how E&S risks and opportunities
impact their activities, and to integrate these considerations in theiroverall business strategy and governance, factoring in the long-term
nature of many of these risks. In this section, ‘E&S strategy’ refers to an
insurer’s integration of E&S considerations with provision of financial
products and services to clients as well as their investment activities.

3
3

3
6
8

Supervisory expectations towards integrating climate
considerations into insurers’ risk strategies are fully (46%)
or partially (26%) applicable in the jurisdictions assessed.
When it comes to environmental and social matters, twothird of jurisdictions assessed have some supervisory
expectations in place.
© Shutterstock – Dean Pennala

69

CENTRAL BANKS AND FINANCIAL SUPERVISORSINTERVIEW:
AUSTRALIAN PRUDENTIAL
REGULATION AUTHORITY (APRA)
Q1

Could you tell us about APRA’s current plans
to foster a more sustainable, green, and resilient
financial system in your jurisdiction?

APRA sees climate risk as a business-as-usual componentof governance and risk management activities acrossbanking, insurance, and superannuation sectors. In 2021,
APRA published a Prudential Practice Guide on Climate
Change Financial Risks to assist financial institutions tomanage the risks and opportunities of climate change
by ensuring that decisions are well-informed.92 A selfassessment survey was subsequently conducted to assess
the alignment of practices of 64 entities with the Guide.93
Another initiative is the Climate Vulnerability Assessment(CVA) covering both physical and transition risks(e.g., mortgages, commercial and agricultural financing)of Australia’s five largest banks which constitute around
80% of market share.94 The assessment was built on the
NGFS scenarios, and supplemented by macroeconomic
models.95 The aggregated results are expected to be
published at the end of 2022.

Q2

More specifically, how is APRA planning tointegrate climate, environmental and/or social
considerations in its activities and mandates?
APRA’s existing governance and risk management
standards that cover both conventional and emerging risks
provides a robust foundation to integrate material climate,environmental and social considerations as appropriate
to each institution. For climate risk, APRA’s guidance
together with the findings from the CVA and survey
builds on this foundation, providing insights to facilitate
further embedding of climate risk considerations within
prudential supervisory activities. APRA is also assessing

the implications of sustainability and climate disclosure
requirements set by the likes of ISSB, and will continue itsrole as an observer to support the Australian Sustainable
Finance Institute (ASFI)’s development of an industry-led
sustainable finance taxonomy.

Q3

How is your institution deepening engagementwith financial institutions on deforestation andnature loss? Does your institution intend to require
financial institutions to publish a transition plan
integrating nature and climate change?
The engagement with financial institutions is anchoredon financial stability. APRA’s mandate is to ensure that
financial institutions understand and manage the risks andopportunities as part of their decision-making processes.
A well-informed transition plan is seen as a valuable climate
risk management practice, as reflected in our guidance.
There are also growing expectations relating to naturerelated risk management and disclosures, such as the TNFD,
that may impact financial institutions in future.

Q4

What are the main challenges that APRA is facingin the definition and implementation of its plan
particularly in addressing nature loss and climatechange risk? What would be needed to overcome these?
There is a trade-off between breadth and depth of climate
assessments. For example, the CVA is a major project thatwill provide a detailed view of climate risk for five entities
in one industry: by comparison, the self-assessment survey
was conducted over four months with broader coverage
across industries (banking, insurance, and superannuation).
We consider there to be value in both of these approaches,
and the information that it provides to ourselves, theentities that we regulate, and the broader market.

© Shutterstock – Alena Charykova

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10

UNDERWRITINGUNDERWRITING10AMERICAS

10

2

11

1

2

10

Globally, supervisory expectations for insurers to include
deforestation in their decision-making, risk management
processes and policies are still uncommon. Only three
jurisdictions (all in APAC) have expressed some expectationsin this area.

INVESTMENT

10
18

1

18

1

18

1 1

17

1 1

17

1 1

17

1

UNDERWRITING

1

EMEA
19

10

INVESTMENTINVESTMENT

EMEA

19

10

UNDERWRITINGAMERICASINVESTMENTUNDERWRITING

10

APAC



1.3.6:	(INVESTMENT): In Malaysia, the VBIAF guidance
mentions biodiversity loss and deforestation,
UNESCO World Heritage Sites, wetlands on
the Ramsar list, Protected Areas as per theInternational Union for Conservation of Nature’s(IUCN) categories I to IV, and Key Biodiversity
Areas in its example activities on exclusion list.
1.3.8: 	Where the financial institution considers thatengagement will not result in adequate risk
management, Australia’s Prudential Practice
Guide CPG 229 Climate Change Financial
Risks mentions the financial institution may needto consider the following options: (a) reflect thecost of risk through risk-based pricing measures,(b) apply limits on its exposure to such an entity or
sector, or (c) where the risks cannot be adequately
addressed through other measures, consider the
institution’s ability to continue the relationship.
1.3.8: Germany’s Federal Financial Supervisory
Authority (BaFin) Guidance Noticeon Dealing with Sustainability Risks
stipulates that the back office should review thefront office assessment and monitor compliancewith relevant sustainability-related limits or
exclusions. The examination should result in a risk
classification for the counterparty or investment
targets. It is key to (a) identify measures to manage
risks and impacts, culminating in a comprehensive
action plan to eliminate the risks, (b) improve thesustainability rating or comply with sustainability
standards, (c) have a legally binding agreementon progress with a mandatory time horizon andreporting duties, and (d) reject transaction whenit meets a specific exposure limit.

INVESTMENT

Deforestation risk: At COP26, more than
30 significant financial institutions representing
US$ 8.7 trillion in assets—including sizable
insurance companies—promised to stop funding
agricultural commodity-driven activities associatedwith deforestation by 2025. Financial institutionscommitted to disclosing the deforestation risk
and mitigation measures in their portfolios by theend of 2023, including in their due diligence andengagement. By 2025, they will publicly report on
progress towards eliminating forest-risk agriculturalcommodity-driven deforestation in their investment/
lending portfolios and only finance clients who meetrisk-reduction requirements.96
Nature-related risks: A recent global surveyof the insurance industry conducted by the UNDP
Sustainable Insurance Forum (SIF) found that thecurrent level of understanding of nature-relatedrisks is lower than related risks such as climatechange and natural hazard risks.97
Economic disruption: The SIF analysis suggeststhat seven economic sectors, accounting for about
10% of global property and casualty insurance
premiums, could be exposed to significant disruption
as nature-related risks become more severe.98
Risk appetites: Front-running insurancecompanies are re-evaluating their investment
decisions, creating risk appetites based on net zero,and implementing carbon reduction plans. They
are also aiding counterparties in going net zero byproviding input during the due diligence phase.99

Insurers are expected to put in place an internal process
to monitor and address situations where their insurance
clients or investee companies are not compliant with
the insurer’s E&S sector policies that are based on
applicable laws and regulations, or with internationallyrecognised science-based scenarios and findings (e.g., IEA
2050 scenario outlining the immediate stop of fossil fuelexploration and expansion projects).

10

UNDERWRITINGGOOD PRACTICESNON-COMPLIANCE MITIGATION (1.3.8)

The supervisor asks insurers whether and how they
integrate deforestation and wider habitat conversion
issues in their decision-making, risk management
processes and policies.

APAC

INSIGHTSINTEGRATION OF NATURE-RELATED RISKS (1.3.6)

INVESTMENT

Insurers should develop sector-specific policies outlining minimum
expectations towards their clients to adequately identify, assess, andmitigate the E&S risks and impacts that they are exposed to through theirbusiness relationships. They should also develop capabilities to understandthe impact of E&S risk drivers on all financial risks, and incorporate these
considerations in the insurers’ overall decision-making as well as risk
management and control processes.

5
2

11

1

12

1

5

1
1

7

2
1

7
10
11

There are few concrete examples of supervisors requiring
insurance companies to monitor their insurance clients’
or investee companies’ E&S sector policy compliance.
Only about 12% of all assessed jurisdictions have some
expectation in this area, and these examples are generally
found in APAC.

73

CENTRAL BANKS AND FINANCIAL SUPERVISORSINTERVIEW:BANK NEGARA
MALAYSIA (BNM)
Q1

What are BNM’s plans to foster a moresustainable, green and resilient financial
system in Malaysia?
BNM’s Financial Sector Blueprint 2022-2026 sets out
the strategies to support an orderly and just transitionof the economy:
 To integrate climate and environmental-related risks in
how we regulate and supervise financial institutions (FIs) To develop an enabling ecosystem and scale up green
finance solutions for FIs to support their clients via
financial solutions and/or shared expertise and bestpractices.
 To embed climate and environmental-related risks
across all functions within BNM, including our operations
and investments.
Expectations on climate risk management are incorporated
in supervisory engagements and letters, beginning 2020.
This is supplemented by BNM’s regulatory expectations
surrounding climate risk management – adoption of the
Climate Change and Principles-based Taxonomy (CCPT);
Climate Risk Management and Scenario Analysis Policy
Document; and Climate Risk Stress Test Discussion Paper.
CCPT is complemented by the Value-Based Intermediation
Financing and Investment Impact Assessment Framework
sectoral guides to guide FIs in incorporating environmental,social and governance risk considerations. BNM also
co-chairs the Joint Committee on Climate Change (JC3)along with the Securities Commission Malaysia, whichcollaborates with the industry in building climate resilienceof the sector.
BNM has launched specialised funds for small and medium
enterprises to transition to low carbon or adopt high-techgreen solutions via the Low Carbon Transition Facility andHigh Tech and Green Facility.

A Sustainability Unit was established in 2021 to driveand coordinate BNM’s response to climate change andto provide expertise to line departments in pursuing
climate initiatives. Capacity building is an ongoing priority,with structured training being rolled out to targeted staff
involved in climate work.

Q2

How is BNM deepening the engagement with
FIs on deforestation and nature loss?

BNM has engaged the financial sector to share findingsof the study on ‘An Exploration of Nature-related Financial
Risks in Malaysia’ done in collaboration with the WorldBank Group. The intention is to create awareness andunderstanding on the interlinkages between climate andnature-related risks. This would prepare the industry forany specific expectations BNM may consider imposing on
FIs in the future.

Q3

What are the main challenges that BNM/Malaysia
is facing in the implementation of its roadmap
particularly in addressing nature loss and climatechange risk?
Critical climate-related data continues to lack in availability,
accessibility, affordability, reliability, and comparability.
The JC3 is working to bridge these gaps by first publishinga data catalogue by end-2022. Engagements are ongoingwith relevant government agencies to enable access toavailable existing data.
While many of the critical ecosystem drivers at thenational level are still being developed e.g., climate-related
legislation, long-term net-zero transition pathways, andcarbon pricing frameworks, Malaysia continues to facechallenges from broad-brush policies and actions ofadvanced economies and the lack of access to affordable,
emerging technologies.

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EMEA

UNDERWRITING

2

4

13

2

17

2

17

2

5

12

3

16

2

17
2

1

4

1

7
11
13

2
1

1

4

7
11
13

Expectations towards applying long-term, science-based,
forward-looking climate scenario analysis and stress testing
are fully (10%) or partially applied (34%) by the assessedjurisdictions.

2

8

AMERICASUNDERWRITING10INVESTMENT

10UNDERWRITING

4

8

1

18

EMEA

INVESTMENT

62

INVESTMENTAMERICAS

10UNDERWRITING

10

Insurers are expected to set science-based climate targets
and keep up to date with the latest climate science toalign their portfolios with the objectives of the Paris
Agreement.

2 1

16

1

4

8

1

4

8

APAC

UNDERWRITING

4

CLIMATE TARGET SETTING (1.4.4)

INVESTMENT

1.4.2: 	In the European Union, EIOPA’s Opinion on
Climate Change Risk Scenarios in ORSA103
states that insurers should subject their material climatechange risks to at least two long-term climate scenarios:(1) scenario where the global temperature increase
remains below 2°C, preferably no more than 1.5°C,
in line with the EU commitments; and (2) scenario
where the global temperature increase exceeds 2°C.
1.4.4 	(INVESTMENT): France’s Code Monétaire et Financier
L533-16-1 requires insurers to publish their strategy
for alignment with the long-term objectives of
Articles 2 and 4 of the Paris Agreement relating to themitigation of greenhouse gas emissions and, whereapplicable, its national low-carbon strategy mentioned
in article L222-1 B of the environment code for thefinancial products in which the underlying investments
are entirely made on French territory.
1.4.7: 	In the Monetary Authority of Singapore(MAS)’s Guidelines on Environmental
Risk Management for Insurers, insurers are
required to identify environmental risk in theirEnterprise Risk Management (ERM) framework.
The ERM requires their policies and proceduresto outline their options for responding to trigger
events such as catastrophes that can result ina high level of claims, collateral calls or policy
terminations, leading to serious liquidity issues.
1.4.12: The Bermuda Monetary Authority (BMA),
in its proposed revisions to the Insurance Code of
Conduct, states that insurers should derive risk
management actions depending on risk appetiteand type of risk, which for climate could include
engagement with policyholders for risk mitigation
and reduction, change of policy conditions andpricing approach, or the decision to limit or
determine to underwrite certain businesses.

6

INVESTMENTCounterparty climate risk: The Global
Insurance Market Report by IAIS found that
more than 35% of insurers’ investment assets are
significantly exposed to climate risks with the
majority relating to counterparties in the housing
and energy-intensive sectors.100
Pricing elements: Some key elements in the
non-life insurance pricing process which will
likely be influenced by climate change, such as
the frequency and severity of extreme weatherrelated events, exposure, information needed forrisk assessment, location, insured loss, reinsurance
availability, competitive considerations, etc.101
Counterparties’ transition plans:Supervisors should consider developing supervisory
expectations towards insurers to consider
counterparties’ transition plans in their analysisof exposures to and management of transition
E&S risks.102

UNDERWRITINGGOOD PRACTICES

Insurers are expected to continuously assess and manage
their exposure to material E&S risks, by using science-based
forward-looking scenario analysis and stress testing, over boththe short- (1 to 5 years) medium- (5 to 10 years) and the longterm (10 to 30 years).

APAC

INSIGHTSSCENARIO ANALYSIS AND STRESS TESTING (1.4.2)

INVESTMENT

Beyond the identification and management of E&S risks and its impacts atthe client or transaction level, insurers should be expected to develop a robust
understanding of their portfolio-level exposure to these risks and the extent
of their negative impacts. Insurers are expected to set science-based targets
on climate and environmental aspects for their underwriting and investment
portfolio, aligning with what the latest environmental science deems necessary
to meet the Paris Agreement and broader global environmental goals.

It is still uncommon for insurance supervisors to include
science-based climate targets in their expectations (only 19%of the assessed jurisdictions do so for underwriting and 14%
for investment activities of insurers). Notably, a few EMEA
jurisdictions put higher expectations on setting climate
targets in investment activities.

77

INSURANCE FINDINGS – INSURANCE SUPERVISIONMICRO-PRUDENTIAL SUPERVISION (SUPERVISORY EXPECTATIONS)NATURAL CATASTROPHE CLAIMS (1.4.7)

1

2

7

1

11

APAC

13 COUNTRIESEMEA

19 COUNTRIES

10 COUNTRIESAMERICAS

Insurers are expected to have specific response plans for
managing significant additional claims associated withnatural catastrophes.

2

2

7

9

Clear expectations towards insurers to have specificresponse plans for additional claims associated with natural
catastrophes are only found in four assessed jurisdictions.
One of the EU Taxonomy regulation criteria also indirectly
encourages this, so as a result, the EU jurisdictions in scope
are partially meeting this indicator.

PRICING INCENTIVES (1.4.12)

1

2

APAC

13 COUNTRIESEMEA

19 COUNTRIES

10 COUNTRIESAMERICAS

Insurers are encouraged to include in their underwriting andpricing practices incentives for their clients to enhance theirresilience to E&S risks.

7

10

1

3

9

9

17 jurisdictions (including 10 in EMEA) are encouraging
insurers to include underwriting and pricing incentives fortheir clients to mitigate E&S risks. The number of EMEA
jurisdictions is boosted by EU regulation EIOPA’s proposed‘impact underwriting’ concept, whereby when a policyholder
has invested in adaptation measures, lower premiums
may be considered as a risk-based reward for preventive
adaptation actions taken by policyholders.
© Shutterstock – Gerry Bishop

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3

EMEA

UNDERWRITING

2

14

2

17

2

17
3

2

14

2

17

2

17

1

2

10

1

12

1

12

1

2

10

1

12

1

12

Out of the 42 assessed insurance jurisdictions, only 11 of them
(26%) expect insurers to integrate E&S considerations in theirEnterprise Risk Management framework (e.g., ORSA).

10 COUNTRIESAMERICASEMEA

1019 COUNTRIES

10

APAC

7

13 COUNTRIES

1© Unsplash – Rod Long

10
10
1

18

1

18

1

18
1

12

1

12
13

Globally, only three supervisors have mentioned expectations
reflecting reinsurers’ specific role as ultimate carriers ofseveral systemic E&S risks. The other 39 jurisdictions
surveyed have not addressed the links between E&S risks andthe reinsurance system.

PRODUCT DEVELOPMENT (1.5.4)

Insurers are expected to integrate E&S considerations
and consumers’ E&S preferences when developing anddistributing new products.
10 COUNTRIESINVESTMENT

2

AMERICASAMERICAS

10

9

1

2

7

1

1

8

1

1

8

EMEA

UNDERWRITING

101

19 COUNTRIES

1.5.1: 	In the Guidance for New York Domestic
Insurers on Managing the Financial Risks
from Climate Change, the New York State
Department of Financial Services (DFS)
expects the ORSA to describe how the insurer
identifies, manages, and monitors climate risks,
as well as the insurer’s climate assessment tools
and methods of incorporating new climate risk
information to monitor and respond to changes
in the insurer’s risk profile. Insurers should
address material climate risks in their ORSA
with a focus on near-term solvency and how theinsurers’ current strategies and risk appetites
are affected by long-term climate concerns.
1.5.3: 	Monetary Authority of Singapore (MAS)’s
Information Paper on Environmental Risk
Management mentions reinsurers’ special rolein decision making stating, “they (reinsurers)
predominantly engage the ceding insurers toencourage them to develop underwriting policies
that consider environmental risks. This isespecially so for the treaty reinsurance business.
For facultative reinsurance business, reinsurers
will have more information of the underlying
insured and its risks. This allows the reinsurers
to perform more in-depth due diligence for suchinsurance policies.”
1.5.4: 	Part of Brazil’s Superintendência de Seguros
Privados (SUSEP) mandate to promote theeffectiveness of the sustainability policy in theinsurance industry is requiring the supervised
body to implement, based on the principles andguidelines contained in the guide, related actions
towards the development and offer of insurance
products or services with E&S considerations.

7

Where applicable, the supervisor has specificexpectations for reinsurers, reflecting their role asultimate carriers of a number of systemic E&S risks.

APAC



Climate risk in ORSA: EIOPA’s survey found thatclimate risk analysis was absent in many insurers’
Own Risk and Solvency Assessments (ORSAs) and,
where it features, the analysis did not consider
the specific impact on the insurer’s business or islimited to short-term horizons. General insurers
have typically focused on short-term physical risks
and the impact of more severe and frequent natural
catastrophes, while life insurers have tended to focus
on impacts on investment portfolios.104
Materiality analysis: Going forward, insurers
should conduct a materiality analysis of their
exposures to climate risk and, if relevant, detail in
their ORSAs how they are managing and accounting
for these risks in their solvency assessments.105
Reinsurers influence: As the ultimate carriersof several risks linked to climate change andsustainability (e.g., flooding), reinsurers havea special interest in ESG issues to make sure that
their claims do not skyrocket and that risks remain(re)insurable in the future. What reinsurers accept tocover, and under which terms, has in turn an impact
on what direct insurers and insurance clients do.
Reinsurers can impose conditions in doing businesswith them – for example, facultative reinsurance
could be provided to an industrial complex only if
certain environmental safety standards are met.106
Catastrophe bonds: A growing number of
institutional investors are investing in catastrophe bonds
designed around parametric triggers (e.g., parametriccoral reef insurance in Quintana Roo, Mexico). Double
triggers (e.g., solar panel warranty insurance) andusage-based mechanisms (e.g., by duration of drone
flying time rather than on an annual basis) can lower
the cost of capital for green technology projects.107

1

EXPECTATIONS OF REINSURERS (1.5.3)

13 COUNTRIESGOOD PRACTICES2INVESTMENTINSIGHTSUNDERWRITING

The integration of risk-based E&S considerations in the prudential rules for
insurance companies, such as through solvency capital requirements, would
contribute to strengthening their risk management systems and ultimately theirresilience to climate-related and environmental shocks. While further researchand data are needed to adequately quantify these risks and to design associatedrisk-based prudential rules, individual insurers can start by identifying the typeof risks they are exposed to and evaluate their resilience.

APAC(RULE-BASED)

Insurers are expected to integrate both short- andlong-term E&S considerations in their Enterprise Risk
Management framework (e.g., in their Own Risk Solvency
Assessment or ORSA).

INVESTMENT

MICRO-PRUDENTIAL
SUPERVISIONENTERPRISE RISK MANAGEMENT FRAMEWORK (1.5.1)

12
2

5

1
1

5
3

13

6

13

6
7
6
7
9

About 50% of the assessed jurisdiction supervisors have set
some expectations for insurers to include E&S considerations
and consumers’ sustainability preferences when developing
and distributing new products (only 6% with a full score).
These expectations are more common in EMEA, generally
partially applicable, and often focused only on investment
products vehicles (such as in the EU with the Sustainable
Finance Disclosure Regulation (SFDR)) and not traditional
insurance policies.

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10COUNTRIESAMERICAS
EMEA

19 COUNTRIES

1

9

1 1

17

1

18
19

APAC

13 COUNTRIES

1
1

5

7

1

11

1

12

It is still very uncommon for supervisors and regulators torequire insurers to disclose their transition plans related toenvironmental and social issues. However, for climate topics
specifically, this is fully or partially considered (e.g., indirectly
through TCFD adoption) in 13 jurisdictions.

DISCLOSURE AGAINST TAXONOMY (1.6.6)

GREENWASHING RISKS (1.6.9)

2

8

2

10

10

AMERICAS

8UNDERWRITING

The supervision of conduct risk for insurance products
sold by insurers includes provisions related to addressing
greenwashing risks.

INVESTMENTAMERICASUNDERWRITING

Insurers are expected to publicly disclose the shareof their total portfolio that is aligned with existingclassification systems for sustainable or unsustainable
activities (taxonomies).

INVESTMENT© Shutterstock – bluedog studio

7

12

7

INVESTMENT

1

12

UNDERWRITING

1

1

12

1

1

18

EMEA

UNDERWRITING12INVESTMENT

xxx

UNDERWRITING

12 1

6

12

APAC



1.6.2: 	The Code Monétaire et Financier
L533-16-1 of France, expects credit institutions
and investment firms to publish a strategy
for alignment with the long-term biodiversity
objectives set for 2030, then every five years, on(a) compliance with the Convention on Biological
Diversity 1992 objectives, (b) contribution to the
reduction of the main pressures and impacts on
biodiversity identified by the Intergovernmental
Science-Policy Platform on Biodiversity andEcosystem Services (IPBES), (c) support fora biodiversity footprint indicator and the way
to measure compliance with international
objectives related to biodiversity.
1.6.6: 	In the EIOPA’s Technical Advice on EU
Taxonomy,111 it is suggested to mandatorily
disclose the ratio of the insurers or reinsurer’s
investments out of their total investments andthe ratio of the non-life gross premiums out of
total non-life gross premiums written, that areassociated with economic activities that qualify
as environmentally sustainable in the EU
Taxonomy.
1.6.9 	(INVESTMENT): The Australian Securities &Investments Commission issued theinformation sheet (INFO 271) on how to
avoid greenwashing when offering or promoting
sustainability-related products. It is also applicable
to insurers offering investment products andoutlines what greenwashing is, the current
regulatory setting for communications aboutsuch products, and questions to consider whenoffering or promoting those products.

9

EMEA



TCFD disclosure recommendations: In a
survey conducted by TCFD, 95% of respondents
saw an increase in the availability of climate-related
financial disclosures since the release of the TCFD
recommendations. 88% of respondents citedimprovements in the quality of disclosures, 90% ofinvestors and other users incorporated climate-related
financial disclosures in their financial decision-making,and 66% of them indicated that such disclosures
factor into the way they price financial assets.108
Transition plans: The Organisation for Economic
Co-operation and Development (OECD) Guidanceon Transition Finance sets out elements of credible
corporate climate transition plans, emphasising
greater transparency, comparability and granularity
in corporate transition plans, and the need foradequate environmental and social safeguards.109
Net zero transition: The Glasgow Financial
Alliance for Net Zero (GFANZ) released its
recommended pan-sector framework for Financial
Institution Net-Zero Transition Planning, andguidance on measuring portfolio alignment, publishedupdates on work to mobilise capital to emerging
markets and developing economies (EMDEs) to
support their net-zero transitions. The Net Zero
Insurance Alliance (NZIA) published its first target
setting protocol for consultation in October 2022.110
However, at this stage net-zero alliances remain only
voluntary commitments by front-running companies,
short of the systematic sector-wide effort which could
be required by financial supervisors.
Green taxonomies: Green taxonomies may
not result in immediate transformations, but their
existence aids in the identification of greenwashingpractices. As a result, the biggest polluters should
be consequently banned from portraying theiractions as “eco-friendly” because of this.

1

INVESTMENTGOOD PRACTICES

5

UNDERWRITING

INSIGHTS

5APAC

Public disclosure of decision-useful information on environmental &social risks and impacts by financial and non-financial corporations is
critical in helping correct market failures and enhance market discipline.
It also contributes to better risk management and facilitates theidentification of sustainable finance opportunities.

Insurers are expected to publicly disclose their time-boundtransition plans to reach set strategies and objectives
pertaining to E&S issues.

INVESTMENTDISCLOSURE&TRANSPARENCY

TIME-BOUND TRANSITION PLANS (1.6.2)

The EU Taxonomy is currently the leading global standard
for green taxonomies, and supervisory expectations toreport against such taxonomies are fully met for 12 of thejurisdictions in EMEA. Outside of EMEA, only one country in
APAC has some taxonomy reporting expectations.

1

11

Most EMEA jurisdictions address greenwashing issues intheir expectations towards the investment products sold byinsurers (notably due to EU regulation). However, this is
usually not the case in the APAC and American jurisdictions
assessed, and it is in general not the case for traditional (noninvestment) insurance products.

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18

1

APAC

13 COUNTRIES

5

8

1

12

1

12

10 COUNTRIESAMERICAS
EMEA

17

2

19 COUNTRIES

10

1

8

1

9

1

9

1

18

1

18

1

18
13

APAC

4

1

13 COUNTRIES

10 COUNTRIESAMERICAS
EMEA

19 COUNTRIES

5

13
13

OBLIGATORY INSURANCE MANDATES (1.7.6)

INTEGRATED FINANCIAL GROUPS SUPERVISION (1.7.7)

2

Only four out of the 42 assessed jurisdictions issued
some form of obligation for insurers to cover E&S relatedrisks. Insurance mandates are still an uncommon policy
instrument, despite the rise of climate-related natural
catastrophes.

11

10 COUNTRIES19

AMERICAS

8

10

19

EMEA

1

19 COUNTRIES

10 COUNTRIES

1

The supervisor monitors the concentration of E&S risks
between the various entities of integrated financial groups(e.g., bancassurance).

APAC

The supervisor has issued obligatory insurance mandates(or similar binding measures such as moratoriums on nonrenewals) in relation to E&S risks.

13 COUNTRIES

1.7.1: 	The Bank of England’s latest Climate
Biennial Exploratory Scenario (CBES) exercise
began in 2021, with results published in May 2022.
Participants include the largest UK banking groups,
life insurers and general insurers. CBES explores
three scenarios building upon the NGFS climate
scenarios. The scenarios include physical, transitionand litigation risks over the period of 2021-2050.
1.7.5: 	In Brazil, the Superintendência de Seguros
Privados (SUSEP) issued Circular SUSEP
Nº 666, which states that the management ofsustainability risks will be part of the general context
of the Internal Controls System (SCI) and the Risk
Management Structure (EGR), and that it must
establish limits for the concentration of risks and/or
restrictions for conducting business that consider the
exposure of economic sectors, geographic regions,products or services to sustainability risks.
1.7.6: 	The State of California has passed Senate Bill824 (2018), an important consumer protection law
which requires a mandatory one-year moratorium
on insurance companies cancelling or non-renewing
residential insurance policies in certain areas withinor adjacent to a fire perimeter after a declared stateof emergency is issued by the Governor.
1.7.7: 	The Monetary Authority of Singapore (MAS)acknowledges their function in ensuring institutions
are supervised on an integrated (across industry)
and consolidated (across geography) basis. The
MAS evaluates them on a whole-of-group basis
across their banking, insurance and securities
activities and also supervises these financial groups
on a consolidated basis, taking into account boththeir local and overseas operations.

10

The supervisor has issued prudential rules to limit the
exposure of insurers to certain activities, in order to preventand protect against the build-up of systemic risk, based on
E&S considerations.

Only three out of the 42 assessed jurisdictions have asked or
required insurers to limit their exposure to certain activities(e.g., thermal coal) to prevent E&S related systemic risk.

AMERICASClimate assessment guide: UNEP FI’s
Comprehensive Good Practice Guide to Climate
Stress Testing lists seven recommendations
for regulators to assist financial institutions:build institutional expertise, require mandatory
disclosures, implement policies on disclosing
required data in standardised formats, provide freeopen-source data, modify current systems used torun models, design scenarios for supervisory climate
stress tests relevant to financial institutions’ scopeand business model, and initiate communication
between financial institutions and experts.112
Secondary perils: As “underwriters andmanagers of climate risk”, the insurance sector
has a competitive advantage over other financial
services players (from banks to asset managers) inunderstanding and assessing the impact of climate
risk on their financial resilience. However, due toinadequate consideration of secondary perils data(such as inland flooding following a hurricane),
the industry’s current loss projections are often
insufficient.113
Climate data integration: Insurance companies
should start implementing climate-specific stresstesting in addition to conventional catastrophe
models to better understand the impact of climaterelated risk on their portfolios. To influence pricing
and portfolio changes, insurers should combine
detailed climate data—down to the danger of a fireor flood for a specific address—with a study of themacroeconomic implications of climate change.114

5
10

EMEA



GOOD PRACTICES

1

19 COUNTRIESINSIGHTS

4EXPOSURE LIMIT (1.7.5)

About 45% of the assessed jurisdiction supervisors haveassessed the exposure of insurers to material climate risks
by using forward-looking scenario analysis or stress testing.
However, about half of these were only partial, typicallylacking a conclusion on potential implications of financial
stability. Similar assessments for other environmental andsocial risks are much less common than for climate.

APAC

Focusing on the stability of the financial system as a whole, macro-prudential
supervision is critical in identifying system-wide imbalances in order toregulate and mitigate these risks. Prudential regulations focus on preventive
measures as it is more efficient and less costly to mitigate issues than it is todeal with damage control later, particularly in the case with climate change
and nature loss matters.

The supervisor has assessed the exposure of insurers tomaterial E&S risks and the implications for financial systemstability, by using forward-looking scenario analysis and stresstesting.

13 COUNTRIESMACRO-PRUDENTIAL
SUPERVISIONSUPERVISOR’S STRESS TESTING (1.7.1)

1

12Specific expectations regarding the supervision of integrated
bancassurance groups and the potential concentration of
E&S risks between their banking and insurance activities are
virtually non-existent in the sample of jurisdictions assessed.
Only one country in APAC mentions the topic.

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3

6

2

10

6

11

1

APAC

13 COUNTRIES

7

8

4

7

6

4

9

7

10 COUNTRIESAMERICAS
EMEA

EMEA

19 COUNTRIES

819 COUNTRIES

8

APAC

2

13 COUNTRIES

10 COUNTRIESAMERICAS

8

3

1

9

1

9
4 1

14

1 1

17

1

18

1

3

1

9
12
13

DATA QUALITY INITIATIVES (1.8.8)

ENGAGEMENT WITH REINSURERS (1.8.9)

3

14

4

2

7

Eight jurisdiction supervisors actively support insurers
through concrete initiatives to address E&S data availability
and quality issues, and a further six jurisdictions do so to amore limited or less tangible extent. Such support is mostcommon in APAC, where it can be found in almost half the
APAC jurisdictions assessed.

10 COUNTRIESAMERICAS

7

9
10
10

2

17

EMEA

2

1

1

19 COUNTRIES

10 COUNTRIES

2

The supervisor organises the exchange of information withreinsurers (e.g., through joint working groups) to leverage
their specific E&S expertise.

APAC

The supervisor actively supports initiatives to address E&S
data availability and quality issues, including through thepromotion of open-source solutions.

13 COUNTRIES

1.8.2: 	In the EU, EIOPA’s work program for
Sustainable Finance Activities 2022-2024
outlines key areas of planned activities such as theintegration of ESG risks in the prudential frameworkof insurers and pension funds, the promotionof sustainability disclosures and a sustainable
framework for conduct of business, or the reductionof insurance protection gaps.
1.8.7: 	De Nederlandsche Bank (DNB)’s “Values
at risk: Sustainability risks and goals in
the Dutch financial sector” in 2019 examined
the scope of physical, transition, and reputation
risks caused by water stress, biodiversity loss, rawmaterial scarcity, and human rights controversies.
The Dutch financial sector’s exposure to the mostwater-scarce regions totals EUR 97 billion, while
exposure to the most critical raw materials is
EUR 56 billion. Of the financial institutions DNB
surveyed, 36% have set indicators and targets fortheir sustainability policies, while 20% evaluate
the impact of their efforts on a regular basis.
1.8.8: 	The Green Finance Action Plan 2.0 issued
by the Financial Supervisory Commission of
Taiwan includes in its objectives the construction
and strengthening of ESG data integration platforms.
It notably plans to integrate the Taiwan Climate
Change Projection Information and Adaptation
Knowledge Platform (TCCIP) and climate change
and environment-related information gatheredby the Environmental Protection Administration(EPA) and relevant ministries in the platform to be
used by businesses and financial institutions in theassessment of potential risks and scenario analysis.

3

2

4

AMERICASNature-related assessments: Financial
supervisors are encouraged by the NGFS to conductimpact and dependency assessments on biodiversity
as well as biodiversity-related scenario analysis
and stress tests at the micro, the financial system,
and regional levels, and identify priority drivers of
biodiversity-related financial risk. Further analysis
and quantification of physical and transition risks
arising from biodiversity losses and creating
a dashboard of biodiversity metrics to monitor thestate of biodiversity risks are also recommended.115
Climate hazard resilience: Insurance
supervisors can catalyse action for resilience toclimate hazards in two ways: (i) by encouraging
supply and demand for valuable and responsible
climate insurance solutions; and (ii) by promoting
the adoption of climate risk management concepts
and practices both internally and among key
stakeholders, including by actively utilising therole and expertise of the insurance industry asrisk experts.116
Protection gap dashboard: The first dashboard
which depicts the insurance protection gap for
natural catastrophes in Europe is being piloted by
EIOPA. The data shows that only 35% of the total
losses caused by extreme weather and climaterelated events across Europe are insured. The
dashboard will help identify regions at risk, thedrivers of a climate-related insurance protection
gap, and define proactive prevention measures.
It should allow for evidence-based decision-making
on measures to improve society’s resilience against
natural catastrophes.117

EMEA



GOOD PRACTICES

7

16 out of 42 jurisdiction supervisors have published analyses
about the transmission channels between climate risks
and the financial system. This number goes down to justfour jurisdictions for other environmental risks, and to twojurisdictions for social matters.

19 COUNTRIESINSIGHTSThe supervisor has conducted and published studies toanalyse the transmission channels between E&S risks andthe economy and financial system.

Most of the assessed country supervisors have published an
official E&S strategy or roadmap (67% cover climate, 43%
cover other environmental issues, and 33% social matters).
However, these roadmaps are often incomplete as they may,for example, lack a proper science-based and time-boundtransition plan.

APAC

Ambitious leadership by financial regulators is central to a successfultransition. Developing internal capacity and expertise on E&S risks andconsiderations is crucial to properly integrate these into their guideline
issuances and subsequently into the financial system.

STUDY ON TRANSMISSION CHANNELS (1.8.7)

The supervisor has published an official E&S strategy orroadmap outlining a science-based transition plan withassociated measures for contributing to a net-zero andnature-positive financial sector, in line with its mandate.

13 COUNTRIESLEADERSHIP & INTERNALORGANISATIONSUPERVISOR’S E&S STRATEGY (1.8.2)

19
19
1
1

1

11
12
13

Only five country supervisors formally collaborate withreinsurers (e.g., through joint working groups) to leverage
their specific E&S expertise, usually in relation to climate
risk. There might be other jurisdictions in which similar
exchanges happen on an ad hoc or limited basis, but this
could not be evidenced from publicly available information.

87

CENTRAL BANKS AND FINANCIAL SUPERVISORSINTERVIEW:
DE NEDERLANDSCHE BANK (DNB)
Q1

How is DNB planning to integrate climate,environmental and/or social considerationsin its activities and mandates?
Sustainability is high on our agenda, and we aim to havesustainability fully integrated into all our tasks by 2025.
In our Sustainable Finance Strategy, we translated ourambition into a set of targets, by each area of our mandate.
We embed sustainability risks into our supervisory
methodology and apply a forward-looking toolkit to identify
macroprudential sustainability risks. Our economic researchand policy advice, feeds and stimulates the public debate
on sustainable prosperity. We make a positive contribution
to global sustainability goals, inter alia via our reserve
management and internal operations. We’d like to highlighttwo significant themes on which we made progress in thelast year:
First, in our supervision. DNB has conducted several studies
and stress tests on the financial risks of climate change andenvironmental degradation to raise awareness among FIs
about the materiality of sustainability risks, for instance,a stress test on flood risk and a study measuring thecarbon footprint of the Dutch financial sector. To give more
concrete guidance to the sector, we published our guideon the management of C&E risks this year for pension
funds, insurers, electronic money and payment institutions,and investment firms. For the banking sector, we applied
the ECB guide on C&E risks. We will use this guide in our
supervisory dialogue with institutions to encourage thesector to take concrete steps to improve their management
practices. We are also working on further integrating theserisks into our supervisory methodology and processes.
Second is biodiversity. In a joint study with the PBL
Netherlands Environmental Assessment Agency in 2020,
we investigated the exposure of Dutch FIs to risks fromloss of biodiversity. We are currently investigating how
biodiversity risks can be integrated into monitoring

financial stability in the Netherlands. Internationally,
we are committed to integrate biodiversity loss and otherenvironmental risks into supervision, as co-chair of theTaskforce for Nature-related Risks of the NGFS.

Q2

What are the main challenges that DNB is
facing in the definition and implementation of
its roadmap particularly in addressing nature loss
and climate change risk? What would be needed toovercome these?
We would like to highlight two challenges relevant to thewider sustainable finance community:
1) The lack of reliable data and measurement methods.
While these data constraints complicate analyses, we needto make use of already available data and not wait for theperfect data set; and 2) Ensuring that standards, including
on disclosure, data, and metrics, are internationallyharmonised. DNB proactively contributes to advancing
the development of (inter)national data, statistics, andstandards.

Q3

Has DNB formed or plan to form any external
partnership to support the implementationof this roadmap?
We actively seek cooperation with a wide range ofstakeholders. Internationally, we participate in the G20,
IMF, BIS and NGFS, the latter of which we are one of thefounding members, as well as with European organisations
such as the ECB and EIOPA. Nationally, we work together
with various private and public authorities for instance via
the Dutch Sustainable Finance Platform established in 2016.
This platform forges connections, encourages action andpromotes partnerships on sustainable initiatives for thefinancial sector, supervisory authorities and government
ministries. Dutch stakeholders are involved in developing
and challenging our Sustainable Finance Strategy, and weannually seek input of a wide range of NGOs.

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10 COUNTRIESAMERICAS
EMEA

19 COUNTRIES

APAC

13 COUNTRIES

3

10

Only three APAC jurisdictions and one country in EMEA
have put in place concrete incentives for insurers to financeor insure certain industry sectors or to develop new andinnovative insurance products.

PUBLIC-PRIVATE PARTNERSHIPS (3.1.11i)© Shutterstock – tabaca

DISASTER RISK REDUCTION FACILITIES (3.1.12i)

The country is part of regional disaster risk reduction
facilities.

10 COUNTRIES

EMEA

1 1

1

8

16 1

3

16

APAC

1

6

13 COUNTRIES

4

1

19 COUNTRIESAMERICAS

National Public-Private Partnerships are in place to support
the continued provision of insurance covering E&S risks(e.g., co-insurance pools).

10 COUNTRIES

3.1.10: 	Financial Supervisory Commission of
Taiwan’s Green Finance Action Plan 2.0
highlights that the country has made progresson achievements in the following areas:(1) relaxed rules and regulations on extensionof credit and financing by financial institutions
to make it easier for renewable energy companies
to obtain credit (loans) from banks and insurancecompanies; (2) encouraged insurers to invest
directly or indirectly in the green energy industry;and (3) promoted green stock index and green
exchange-traded funds (ETFs) derived therefrom,green insurance, and other green financial products.
3.1.11: 	The New Zealand Earthquake
Commission’s EQCover scheme provides
natural disaster insurance for residential homes
and land. EQCover is government-guaranteed,which provides assurance to customers that if there
is a very large number of claims – for example, after
a major natural disaster – then the government
will pay the shortfall.
3.1.11: 	The National Flood Insurance Program(NFIP) is a program created by theCongress of the United States in 1968
through the National Flood Insurance Act of1968 (P.L. 90-448). The NFIP has two purposes:
to share the risk of flood losses through flood
insurance and to reduce flood damages by
restricting floodplain development. The program
enables property owners in participating
communities to purchase insurance protection,
administered by the government, against losses
from flooding.

18

AMERICAS

Innovative products: The Innovative Insurance
Products for the Adaptation to Climate Change(IIPACC) project aims to equip the insurance
industry with tools needed to create cutting-edge,
market-driven, and financially viable insurance
products to protect against the financial risks
associated with extreme weather events. This
served as the basis behind Ghana’s first agricultural
insurance pool (GAIP). Three products of GAIP
are currently available on the market: (1) a drought
Weather Index Insurance (WII) product forsmallholder farmers, (2) Multi-Peril Insurance
for Poultry (MPIP) for commercial farmers, and(3) Multi-Peril Crop Insurance (MPCI) for
commercial farmers.118
Risk disaster reduction facility and a public
insurance pool: Natural disasters could lead tosignificant fiscal risk and major budget instability.
To mitigate this, there are several public insurance
pool initiatives designed to reduce the financial
losses caused by natural hazards. For instance,
the Caribbean Catastrophe Risk Insurance
Facility119 which consists of 19 Caribbean member
governments offers parametric insurance policies
for tropical cyclones, earthquakes, excess rainfall,
the ﬁsheries sector and the public utilities sector.
It provides short-term liquidity when a policy is
triggered, with a total of 54 pay-outs amounting
to US$ 245 million issued to date.

1

EMEA



GOOD PRACTICES

1019 COUNTRIESINSIGHTS

Tax, regulatory or other incentives are in place for
insurers to finance or insure certain industry sectors
or to develop new and innovative insurance products,
based on E&S considerations (for example supporting
long-term investments in illiquid assets such assustainable infrastructure or providing performance
warranty for renewable energy solutions).

APAC

A pivotal factor to sustainable change is a conducive environment, such as
incentives for the development of sustainable insurance products, publicprivate partnerships, and disaster risk reduction facilities. These factors
enable the smoother adoption of sustainable finance principles by insurers
and supervisors of the insurance sector in its internal practices, activities andfinancial flows. The enabling environment indicators presented for banking
in the previous section are also applicable to insurance. In this section, we will
only focus on additional, insurance-specific, enabling environment indicators.

INCENTIVES FOR PRODUCT DEVELOPMENT (3.1.10i)

13 COUNTRIESENABLING ENVIRONMENT

1

11

Eight assessed jurisdictions in total are members of disasterrisk reduction facilities, most of them in APAC throughthe Southeast Asia Disaster Risk and Insurance Facility(SEADRIF). Please note that Caribbean countries are notcovered by SUSREG assessment.

Nine jurisdictions out of 42 have implemented PublicPrivate Partnerships (PPP) to support the continued
provision of insurance for E&S risks.

5

7

1

91

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93

CONCLUSION
Through its role as a provider of capital, credit, and insurance
to the real economy, the financial system has a critical partto play in the transition to a low-carbon, nature-positive andfair economy. While a handful of leading financial institutions
around the world may have taken the first steps to embark
on this journey, ad hoc, voluntary and uncoordinatedaction will fall short of the systematic effort neededto address the global challenges of global warming
and biodiversity loss. Climate change and the degradationof nature are drivers of financial risks. Specific and ambitious
central bank policies, financial regulation, and supervisory
guidance are needed to prompt and support adequate
collective action from financial institutions. Without suchan underpinning framework, the financial sector will only
mobilise in a slow, partial, and fragmented manner, hinderedon the one hand by the lack of ambition of some of its
members and on the other hand by obstacles like anti-trust
legislation which constrains the degree to which frontrunning companies may coordinate their action.
Some initial progress has been made in recent years.
First analyses of the financial system’s exposure to andits impact on nature have been conducted by the NGFS
and in several jurisdictions, and efforts are on the way toaddressing data and methodological challenges. Central
banks and financial supervisors are increasingly publishing
their own climate and sustainability strategies and roadmaps,
although sometimes only partially addressing the underlying
sustainability issues and their associated consequences.
Several taxonomies of sustainable activities have beenlaunched to combat greenwashing and help market actors
identify financing and investments that meet climate
and environmental objectives in a harmonised manner.
However, neither science-based metrics to operationalise theclassification system, nor ‘brown’ taxonomies as a necessary
complement to the ‘green’ taxonomies, are fully in place.
Overall, central banks and financial supervisors have yet toaddress sustainability risks in a holistic manner and makefull use of their market-shaping role to limit the negativeenvironmental impacts generated by regulated actors.
This puts at risk not only the financial stability of the markets
and the solvency of the institutions they supervise, but also
the entire future well-being and prosperity of humanity.
In this context, WWF’s Sustainable Financial Regulations andCentral Bank Activities (SUSREG) tracker aims to contributeNEXT STEPS
to improving the understanding of how environmental andsocial risks can be integrated into the activities of central
banks and financial supervisors.
As has been documented in this report, there are still many
gaps. Relevant policies, regulation, and supervisory
guidance for the financial sector are being developed,
but with a pace and a geographical and topical scopethat is not commensurate with those of the ongoingclimate and biodiversity crises. Expectations aroundstrategy, governance, and disclosures are being gradually
introduced, but concrete incentives and prudential measures
are still rare. Broader environmental and social expectations
often lag narrower climate change-related issues. For the
insurance sector specifically, there is more work to bedone to ensure that both the investment and underwriting
activities of insurers are subject to appropriate and consistentexpectations. While the integration of risk and impact
considerations in policies and processes has started in someleading jurisdictions, much remains to be done to create
a global level-playing field and systematically incorporate
the emerging good practices pointed out in this report.
Interestingly, some central banks and financial supervisors
in developing countries have demonstrated meaningfulprogress and stronger commitments in E&S safeguards
vis-a-vis more developed countries, implying that lesser
economic and technological advancement may notnecessarily be a barrier to achieving sustainable development.

NEW ONLINE PLATFORM
The next and third SUSREG annual report will be publishedtowards the end of 2023. In the meantime, the SUSREG
journey will continue beyond this 2022 annual report with,and a new online platform will be made available in 2023.
This free online platform will allow central banks, financial
supervisors, finance professionals, researchers, insurers
and the wider public to access the full set of indicators
for the 44 jurisdictions included in this year’s assessment(of which the findings in this report only constitute a selection
and summary). Links to and references from any regulation,
supervisory guidance and/or other relevant public documents
used to derive the assessments will also be included on thewebsite to allow for transparency and cross-referencing.

INCREASING SCOPE; BANKING, INSURANCE
AND ASSET MANAGEMENT
The first SUSREG report in 2021 focused on central banks
and banking supervisors, and insurance supervision was
included for the first time this year. In future years, otherfinancial sectors will be gradually integrated into the scopeof these assessments, starting with asset management.

Similar to the extension from 38 to 44 jurisdictions between
2021 and 2022, more jurisdictions may also be integrated
into the SUSREG scope of assessments in the future.
As has happened this year, the selected indicators will
also be fine-tuned to reflect the latest advances and areasof focus in sustainable finance regulation.

ENHANCING COLLABORATION ANDENABLING CAPACITY BUILDINGOver the last year, experience has shown a great interest
in SUSREG from central banks and banking supervisors.
WWF will continue its direct engagement with relevant
parties (as well as with insurance supervisors going forward)
through bilateral dialogue and workshops. The SUSREG
framework and assessments can notably be leveraged tohelp central banks and banking supervisors benchmark theirpolicies against emerging regional and global good practices.
More generally, WWF will aim to enhance this collaboration
to help highlight mainstream nature-related issues throughcapacity building, provision of specific guidance to integrate
deforestation and freshwater risks into central banking andsupervisory activities and offer targeted assistance on tools
and methodologies.

Given the urgency to act in the face of mounting
climate and environmental crises, WWF expects
central banks and financial supervisors toaccelerate the full mobilisation of their monetary
policy and regulatory and prudential tools to
support a timely and orderly transition towards
a more sustainable economy. WWF also expects
supervisory expectations to extend beyond climate
and cover broader environmental and social topics.
In this critical decade of action, ambitious earlyintervention and international coordination willbe the key to success. It is our hope that the SUSREG
framework and tracker will contribute in strengthening
and harmonising sustainability practices among central
banks and financial regulators worldwide towards adopting
nature-positive policies by 2030, limiting global warming
to 1.5ºC, and achieving net-zero emissions by 2050 or earlier.

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95

ANNEXES© Unsplash – Jovana Askrabic

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97

ANNEX 1:
LIST OF ACRONYMS

ANNEX 2:
COUNTRIES AND INSTITUTIONS COVEREDREGION / COUNTRYACPRThe French Prudential Supervision and
Resolution Authority

GSF

The Centre for Green and Sustainable Financein Hong Kong

APAC

Asia-Pacific

HKMA

Hong Kong Monetary Authority

BRAZIL

APRA

Australian Prudential Regulation Authority

BAFIN

International Association of Insurance
Supervisors

CANADAThe Federal Financial Supervisory Authority ofGermany

IAIS
ICAAP

Internal Capital Adequacy Assessment
Process

IEA

International Energy Agency

IFRS

INSURANCE SUPERVISORBANKING SUPERVISORCENTRAL BANK

Bermuda Monetary Authority (BMA)

Not assessed

Not assessed

AMERICAS
BERMUDACHILECOLOMBIA

Superintendência de Seguros Privados (SUSEP)

Banco Central do Brasil (BCB)

Office of the Superintendent of Financial Institutions (OSFI)Bank of Canada (BoC)

Comisión para el Mercado Financiero (CMF)

Banco Central de Chile

Superintendencia Financiera de Colombia (SFC)

Banco de la República (BANREP)COSTA RICA

Superintendencia General de Seguros de Costa Rica
(SUGESE)

Superintendencia General de Entidades
Financieras (SUGEF)

Banco Central de Costa Rica (BCCR)MEXICO

Comisión Nacional de Seguros y Fianzas (CNFS)

Comisión Nacional Bancaria y de Valores (CNBV)

Banco de México (Banxico)International Financial Reporting Standards

UNITES STATESOF AMERICA

Federal Insurance Office (FIO)
Federal Deposit Insurance Corporation (FDIC)
National Association of Insurance Commissioners

Office of the Comptroller of the Currency (OCC)
The Federal Reserve (FED)
Federal Deposit Insurance Corporation (FDIC)The Federal Reserve (FED)

BCB

Banco Central do Brasil

BCBS

Basel Committee on Banking Supervision

BDP

Banco de Portugal

BIS

Bank for International Settlements

IKI

International Climate Initiative

NEW YORK

Office of the Comptroller of the Currency (OCC)
Federal Reserve Bank of New YorkThe Federal Reserve (FED)

BNM

The Central Bank of Malaysia

BOE

Bank of England

ILAAP

Internal Liquidity Adequacy Assessment
Process

The New York State Department of Financial
Services (DFS)CALIFORNIA

California Department of Financial Protection andInnovation (DFPI)The Federal Reserve (FED)BSP

The Central Bank of Philippines

IMF

International Monetary Fund

Office of the Comptroller of the Currency (OCC)
Federal Reserve Bank of San Francisco
California Department of Financial Protection andInnovation (DFPI)

C&E

Climate and environmental

CASG

The Green and Sustainable Finance CrossAgency Steering Group

CBFS

Central banks and financial supervisors

CDP

Carbon Disclosure Project

COP15

15th meeting of the Conference of the Parties
to the Convention on Biological Diversity
(CBD)

COP27

27th Conference of the Parties to the United
Nations Framework Convention on Climate
Change (UNFCCC)

CSRD

Corporate Sustainability Reporting Directive

CSSF

The Commission de Surveillance du Secteur
Financier of Luxembourg

The International Network for Sustainable
INSPIRE Financial Policy Insights, Research, andExchange
ISSB

International Sustainability Standards Board

MAS

Monetary Authority of Singapore

MNB

The Central Bank of Hungary

NFRD

EU Non-Financial Reporting Directive

NGFS

Network of Central Banks and Supervisors forGreening the Financial System

NZDPU

Net-Zero Data Public Utility

OJK

The Financial Service Authority of Indonesia

OMFIF

Official Monetary and Financial Institutions
Forum

ORSA

Own Risk and Solvency Assessment

EMEA
DENMARKEUROPEAN UNION

Banque de France (BDF)

GERMANY

Federal Financial Supervisory Authority (BaFin)

Deutsche Bundesbank

GREECE
Institute for the Supervision of Insurance

Banca d’Italia

KENYA

Insurance Regulatory Authority (IRA)

Central Bank of Kenya

LUXEMBOURG

Commissariat aux Assurances (CAA)

MOROCCONORWAY

Banco de Portugal

SOUTH AFRICA

South African Reserve Bank - Prudential Authority

South African Reserve Bank (SARB)

Dirección General de Seguros y Fondos dePensiones

Banco de España

Reserve Bank of India

EBA

European Banking Authority

RE

Regulated entities

ECB

European Central Bank

SEC

Social, Environmental and Climate

EIOPA

European Insurance and Occupational
Pensions Authority

SIF

Sustainable Insurance ForumZAMBIA

Small and medium-sized enterprises

Europe, Middle-East and Africa

SME

ASIA PACIFIC

EMEA

SUSREG

Sustainable Financial Regulations and Central
Bank Activities

AUSTRALIAG20

The Group of Twenty (of the world’s largest
economies)

GDP

Gross Domestic Product

GFANZ

Glasgow Financial Alliance for Net Zero

GFRI

WWF’s Greening Financial Regulation Initiative

GHG

Greenhouse gas

98 | SUSREG ANNUAL REPORT 2022

TNFD
UNEP

United Nations Environment Programme

VBIAF

Malaysia's Value-based Intermediation
Financing and Investment Impact Assessment
Framework

Norges Bank

Saudi Central Bank (SAMA)

RBI

Taskforce on Nature-related Financial
Disclosures

De Nederlandsche Bank (DNB)
Finastilsynet (Financial Supervisory Authority of Norway)

Not assessed

Environmental and Social

Financial Stability Board

Bank Al-Maghrib

SAUDI ARABIAPORTUGAL

E&S

FSB

Banque centrale du Luxembourg (BCL)

Autoridade de Supervisão de Seguros e Fundosde Pensões

SWEDEN

Task Force on Climate-related Financial
Disclosures

Commission de Surveillance du Secteur Financier(CSSF)The Supervisory Authority for Insurance and Social
Welfare (ACAPS)NETHERLANDS

SPAIN

TCFD

Magyar Nemzeti Bank (MNB)

ITALY

Public-Private Partnerships

Financial Institutions

Bank of Greece

HUNGARY

PPP

FI

European Central Bank (ECB)

Autorité de contrôle prudentiel et de résolution (ACPR)De Nederlandsche Bank

Environmental, Social, and Governance

Danmarks Nationalbank

European Banking Authority (EBA)
European Central Bank (ECB)FRANCEDNB

ESG

Danish Financial Supervisory Authority
European Insurance and Occupational Pensions
Authority (EIOPA)

Finansinspektionen (The Financial Supervisory Authority)

Sveriges Riksbank

SWITZERLAND

Swiss Financial Market Supervisory Authority (FINMA)

Swiss National Bank (SNB)

UNITED ARAB
EMIRATES

Central Bank of the UAE, Dubai Financial Services Authority (DFSA) for the Dubai International Financial
Centre (DIFC), Financial Services Regulatory Authority (FSRA) for Abu Dhabi Global Market (ADGM)

Central Bank of the UAE

Prudential Regulation Authority (PRA)

Bank of England (BoE)

UNITED KINGDOMCHINAHONG KONG
INDIA

Not assessed

Bank of Zambia

Australian Prudential Regulation Authority (APRA)

Reserve Bank of Australia (RBA)

China Banking and Insurance Regulatory Commission (CBIRC)
Insurance Authority HK

People’s Bank of China (PBoC)
Hong Kong Monetary Authority (HKMA)

Insurance Regulatory and Development Authority

Reserve Bank of India (RBI)

INDONESIA

Otoritas Jasa Keuangan (OJK)Bank Indonesia (BI)JAPAN

Financial Services Agency (FSA)Bank of Japan (BOJ)

MALAYSIABank Negara Malaysia (BNM)

NEW ZEALAND
PHILIPPINES

Reserve Bank of New Zealand (RBNZ)
Insurance Commission

SINGAPORE
SOUTH KOREA

Bangko Sentral ng Pilipinas (BSP)
Monetary Authority of Singapore (MAS)

Financial Supervisory Service (FSS)TAIWAN

Financial Supervisory Commission

THAILAND

Office of Insurance Commission

Bank of Korea (BOK)
Not assessed

Not assessed
Bank of Thailand (BOT)99

ANNEX 3:
SUSREG INDICATORSBANKING INDICATORSMICRO-PRUDENTIAL SUPERVISIONSCOPE & IMPLEMENTATION

1.1.0

1.1.1

1.1.2

Principle-based regulations or
supervisory expectations related tosustainable banking have been issued
and are applicable to all supervisedcommercial banks.

1.2.11

The regulations or supervisory
expectations cover a broad range ofenvironmental and social (E&S) issues.
The regulations or supervisory
expectations reflect both the expected
impact of E&S issues on the bank’srisks and value creation, and theimpacts of the bank’s activities on
E&S issues (’double materiality
assessment’).

1.1.3

The regulations or supervisory
expectations extend beyond lending
to cover other financial products &services provided by banks.

1.1.4

The supervisor regularly tracks
progress and assesses the banks’
implementation of E&S regulations or
supervisory expectations.

1.1.5

1.2.10Public consultation was carriedout prior to the official issuanceof E&S regulations or supervisory
expectations.

1.2.12

1.2.13Banks are expected to integrate
E&S considerations in their businessstrategy, consistent with the size andnature of their operations.

1.2.2

Banks are expected to consider E&S
risks when preparing their boardapproved risk appetite statement,
supported by quantitative limits andqualitative expectations.

1.2.3

Banks are expected to extend E&S
consideration beyond short term (1 to
5 years) to medium (5 to 10 years) andlonger term (10 to 30 years) in theirbusiness and risk management.

1.2.4

1.2.5

1.2.6

1.2.7

1.2.8

1.2.9

Banks are expected to regularly
provide their board with relevant
information related to theimplementation of their E&S strategy.
Banks are expected to include
criteria related to their E&S strategy
implementation in their appraisal andremuneration policy.
Banks are expected to dedicate staff
and resources to the definition,
development and implementation of
their E&S strategy.
The supervisor has included E&S
considerations in the appointment ofboard members of banks.

1.3.1

1.3.2

1.3.3

100 | SUSREG ANNUAL REPORT 2022

Banks are expected to engage
stakeholders (incl. civil society
representatives) and consider theirviews on relevant E&S issues.
The supervisor expects banks toembed sustainability considerationsin their existing code of conduct,investment guidelines, lending
guidelines and risk guidelines (rather
than only as separate documents).

Banks are expected to develop andimplement sector policies outlining
minimum E&S requirements for theirclients, particularly in sectors with highE&S risks and impacts.
Banks are expected to refer to andapply internationally recognizedsustainability standards andcertification schemes in their E&S
sector policies.
Banks are expected to engage with andsupport their clients on the adoption ofbest practices, based on internationallyrecognized sustainability standards
and certification schemes.

1.3.4

Specific guidelines or checklists
covering the banks’ activities in sectors
with high E&S risks and impacts havebeen issued by the supervisor.

1.3.5

Banks are expected to integrate E&S
considerations in their decision-making
and risk management processes andpolicies.

1.3.6

The supervisor asks banks whether andhow they integrate deforestation andwider habitat conversion issues in theirdecision-making, risk management
processes and policies.

1.3.7

1.3.8

Banks are expected to define theroles and responsibilities of the board
involved in the oversight of the E&S
strategy.
Banks are expected to define the roles
and responsibilities of the executive
management for the implementationof the E&S strategy.

Banks are expected to conduct regulartraining on relevant E&S issues for theirboard, senior management, businesslines and functions, as well as broader
staff.

1.3.10Banks are expected to adopt
and implement an active client
engagement approach*, in relation
to E&S considerations for lending andinvestment activities.

1.3.11The supervisor expects banks todevelop systems that are integrated
in the banking group’s broader data
governance and IT infrastructure toeffectively collect and aggregate E&S
risk and impact data.

PORTFOLIO RISK & IMPACT
1.4.1

Banks are expected to continuallyassess, manage and mitigate theirportfolio-level exposure to material
E&S risks.

1.4.2

Banks are expected to continuallyassess, manage and mitigate theirportfolio-level exposure to material
E&S risks, by using science-based,
forward-looking scenario analysis andstress testing over the short- (1 to 5
years) medium- (5 to 10 years) and thelong-term (10 to 30 years).

POLICIES & PROCESSESSTRATEGY & GOVERNANCE
1.2.1

Banks are expected to include E&S
considerations in the roles andresponsibilities of most core functions(incl. senior management) in areas
such as lending, savings/deposits,
investments and risk management.

1.3.9

Banks are expected to put in placeinternal controls to manage E&S risks,in accordance with the three lines ofdefence approach.
Banks are expected to put in place
an internal process to monitor andaddress situations where clients are
not compliant with the banks’ E&S
policies that are based on applicablelaws and regulations, or internationallyrecognized science-based scenariosand findings (e.g., IEA 2050 scenario
outlining the immediate stop of
fossil fuel exploration and expansion
projects).
Banks are expected to seek theinclusion of clauses (e.g., covenants,
representations & warranties)
related to E&S issues in the loan
documentation for bilateral andsyndicated credit facilities.

1.4.3

1.4.4

Banks are expected to continuallyassess, manage and mitigate thematerial negative E&S impacts
associated with their business
relationships, at the portfolio level.
Banks are expected to set climate
science-based targets and keep up todate with the latest climate science, toalign their portfolios with the objectivesof the Paris Agreement.

1.4.5

Banks are expected to set sciencebased targets to mitigate negativeenvironmental impacts beyond climate,at the portfolio level.

1.4.6

Banks are expected to assess andmitigate reputation and litigation risks
associated with E&S considerations.

1.4.7

Where banks outsource their E&S
risk analysis to third parties, they are
expected to retain/exercise ultimate
oversight and control of these third
parties. Banks are expected to validate
the analysis by third parties and be
fully accountable to any decisions
influenced by or derived from theanalysis.

MICRO-PRUDENTIAL SUPERVISION (RULEBASED)
1.5.1

1.5.2

1.5.3

1.5.4

Banks are expected to integrate E&S
considerations in their Internal Capital
Adequacy Assessment Process (ICAAP).
Minimum capital requirements orcapital add-ons for banks incorporate
E&S considerations, through adifferentiated risk-based approach.
Banks are expected to integrate E&S
considerations in their liquidity risk
management process.
Liquidity ratios are adjusted to takeE&S considerations into account,through a differentiated risk-based
approach.

1.6.2

Banks are expected to publicly disclose
their time-bound transition plans toreach set strategies and objectives
pertaining to E&S issues.

1.6.3

Banks are expected to useinternationally recognizedsustainability reporting frameworks toguide their public disclosures.

1.6.4

Banks are expected to include
information on their E&S strategy andits implementation in their annual
report, including non-achieved targets
and taken measures.

1.6.5

Banks are expected to publicly disclose
their credit exposure by industry
sub-sectors, based on international
industry classification systems.

1.6.6

Banks are expected to publicly
disclose the share of their total lending
portfolio that is aligned with existingclassification systems for sustainable orunsustainable activities (taxonomies).

1.6.7

Banks are expected to report publicly
on their portfolio-level exposure tomaterial E&S risks and the associatedmitigation measures.

1.6.8

Banks are expected to report publicly
on the material negative E&S impacts
associated with their business
relationships, at the portfolio level.

1.6.9

1.6.1

The supervisor has established aninternal organisation and allocatedresources to the implementation of its
E&S strategy or roadmap.

1.8.4

The supervisor has conducted studies
to assess the banking sector’s exposure
to, and management of, E&S risks,and published its conclusions andrecommendations.

1.8.5

The supervisor goes beyond measuring
conventional risk exposure to regularly
assessing the alignment of the banking
sector to global sustainability goals.

1.8.6

The supervisor provides training on
E&S issues to key staff, notably forsenior management and supervisorydepartments.

1.8.7

The supervisor has conducted andpublished studies to analyse thetransmission channels between
E&S risks and the economy and thefinancial system.

1.8.8

The supervisor actively supports
initiatives to address E&S data
availability and quality issues, including
through the promotion of open-source
solutions.

CENTRAL BANKINGMONETARY POLICY
2.1.1

MACRO-PRUDENTIAL SUPERVISION

The central bank takes E&S
considerations into account when
implementing corporate asset
purchase programs.

2.2.5

The central bank has established aninternal organisation and allocatedresources to the implementation of its
E&S strategy or roadmap.

2.2.6

The central bank assesses anddiscloses the exposure of its portfolios
to E&S risks (for its policy, own,
pension and third-party portfolios asapplicable).

2.2.7

The central bank integrates
E&S considerations in its asset
management practices (for its own,
pension and third-party portfolios asapplicable).

2.2.8

The central bank publicly discloses theshare of its own portfolio that is alignedwith existing classification systems forsustainable or unsustainable activities(taxonomies).

ENABLING ENVIRONMENT

3.1.1

A multi-stakeholder sustainablefinance initiative is in place, involving
representatives from the financial
industry, regulatory and supervisory
authorities, as well as from civil society.

3.1.2

The central bank, supervisor orbanking/insurance association is
supporting capacity building efforts forthe financial industry, on sustainablebanking and insurance practices andrelated aspects.

3.1.3

A classification system for sustainable
activities (taxonomy) is in place and has
been developed following a sciencebased and multi-stakeholder process.

3.1.4

A classification system forunsustainable activities (taxonomy)
is in place and has been developed
following a science-based and multistakeholder process.

2.1.2

The central bank takes E&S
considerations into account in its
collateral framework.

2.1.3

The central bank integrates E&S
considerations in the management of
its foreign exchange reserves portfolio.

1.7.2

The supervisor has published its
methodology for forward-looking
scenario analysis and stress testing for
public consultation.

2.1.4

The central bank offers subsidisedloans or preferential targetedrefinancing lines based on E&S
considerations.

3.1.5

1.7.3

The supervisor has published theaggregated results of its stress testing
exercise on material E&S risks, as wellas its recommendations.

2.1.5

The central bank takes E&S
considerations into account indetermining reserve requirements forbanks.

Non-financial corporates are required
to report on current and planned
activities according to internationallyor nationally recognized sustainability
reporting standards and definitions.

3.1.6

Non-financial corporates are required
to publish science-based transition
plans.

The supervisor has developed specificrisk indicators to monitor the exposureof banks to material E&S risks.

LEADERSHIP & INTERNAL ORGANISATION

1.7.4

3.1.7

The central bank is a member of the
Network for Greening the Financial
System (NGFS).

A carbon pricing mechanism is being
implemented in the country.

3.1.8

There is a national-level sustainability
strategy, and financial institutions
encouraged to make and adhere to
net-zero transition plans.

3.1.9

Regulations or guidelines covering theissuance or provision of sustainablefinancial products are in place andare based on standards developed
following a science-based and multistakeholder process.

3.1.10Targets or incentives are in place forbanks to support the transition to a
net-zero and nature-positive economy,
by engaging with hard to abate sectors
without substitutes, channelling capital
into innovative technological andnature-based solutions, or into certain
industry on the basis of sustainability
considerations.

1.7.1

1.7.5

1.7.6

The supervisor has assessed theexposure of banks to material E&S
risks and the implications for financial
system stability, based on forwardlooking scenario analysis and stresstesting.

The supervisor has issued prudential
rules to limit the exposure of banks tocertain activities, in order to preventand protect against the build-up
of systemic risk, based on E&S
considerations.

1.8.1

1.8.2

2.2.1

2.2.2

Specific capital requirements for banks
incorporate a macro-prudential buffer
for systemic E&S risks.

LEADERSHIP & INTERNAL ORGANISATIONDISCLOSURE & TRANSPARENCY
Banks are expected to publicly disclose
how E&S considerations are integrated
in their business strategy, governance(including remuneration), policies andrisk management processes.

Banks are expected to seek external
assurance for their E&S public
reporting and disclosures.

1.8.3

2.2.3

The central bank has published an
official strategy or roadmap of ascience-based transition plan withassociated measures for designing a
net-zero and nature-positive financial
centre, in line with its mandate.

2.2.4

The central bank regularly reports
publicly on their exposure to andmanagement of climate-related risks
and opportunities, along with the TCFD
recommendations.

The supervisor is a member of the
Network for Greening the Financial
System (NGFS).
The supervisor has published an
official E&S strategy or roadmap
outlining a science-based transition
plan with associated measures forcontributing to a net-zero and naturepositive financial centre to address E&S
risks and opportunities in the financial
sector, in line with its mandate.

The central bank has defined sciencebased, climate and environmentalrelated nominal anchors as objectives
beyond conventional ones (e.g.,
relating to price stability, full
employment).

101

ANNEX 3:
SUSREG INDICATORS
INSURANCE INDICATORSMICRO-PRUDENTIAL SUPERVISIONSCOPE & IMPLEMENTATION

1.1.0

1.1.1

1.1.2

1.1.3

1.1.4

The principle-based regulations or
supervisory expectations related tosustainable insurance which have been
issued are applicable to all supervised
insurers.
The regulations or supervisory
expectations cover a broad range ofenvironmental and social (E&S) issues.
The regulations or supervisory
expectations reflect both the expected
impact of E&S issues on the insurer’s
risks and value creation, and theimpacts of the insurer’s activities
on E&S issues (’double materiality
assessment’).
The supervisor tracks insurancecompanies' progress against
regulatory/supervisory E&S
expectations and addresses a
corresponding report to thecompanies.
Public consultation was carriedout prior to the official issuanceof E&S regulations or supervisory
expectations.

1.2.101.2.11

1.2.1

1.2.2

Insurers are expected to consider E&S
risks when preparing their Boardapproved risk appetite statement,
supported by quantitative limits andqualitative expectations.

1.2.3

Insurers are expected to extend E&S
consideration beyond the short term
(1 to 5 years) to the medium (5 to
10 years) and the longer term (10 to
30 years) in their business and risk
strategy.

1.2.4

Insurers are expected to regularly
provide their board with relevant
information related to theimplementation of their E&S strategy.

1.2.5

Insurers are expected to include
criteria related to their E&S strategy
implementation in their appraisal andremuneration policy.

1.2.6

Insurers are expected to dedicate
staff and resources to the definition,
development and implementation of
their E&S strategy.

1.2.7

1.2.12

1.2.13The supervisor expects insurers toembed sustainability considerationsin their existing code of conduct,investment guidelines, underwriting
guidelines and risk guidelines (rather
than only as separate documents).

1.2.8

1.2.9

Insurers are expected to define
the roles and responsibilities ofthe executive management for the
implementation of the E&S strategy.

102 | SUSREG ANNUAL REPORT 2022

1.3.9

Insurers are expected to adopt andimplement an active client engagement
approach, in relation to E&S
considerations for their investment
and underwriting activities.

1.3.10The supervisor expects insurers todevelop systems that are integrated
in the insurance group’s broader data
governance and IT infrastructure toeffectively collect and aggregate E&S
risk and impact data.

1.3.1

1.3.2

1.3.3

1.3.4

1.3.5

Insurers are expected to develop andimplement sector policies outlining
minimum E&S requirements fortheir insurance clients and investee
companies, particularly in sectors withhigh E&S risks and impacts.
Insurers are expected to refer toand apply internationally recognizedsustainability standards andcertification schemes in their E&S
sector policies.
Insurers are expected to engage
with and support their insurance
clients and investee companies in
the adoption of best E&S practices,
based on internationally recognizedsustainability standards andcertification schemes.

1.4.1

Insurers are expected to continuallyassess, manage and mitigate the levelof exposure of their portfolios tomaterial E&S risks.

1.4.2

Insurers are expected to continuously
assess and manage their exposure tomaterial E&S risks, by using sciencebased forward-looking scenario
analysis and stress testing, over boththe short- (1 to 5 years) medium- (5 to
10 years) and the long-term (10 to 30
years).

1.3.6

The supervisor asks insurers whether
and how they integrate deforestation
and wider habitat conversion
issues in their decision-making, risk
management processes and policies.

1.3.7

Insurers are expected to put in place
an internal control framework to
manage E&S risks, in accordance withthe three lines of defence approach.

1.3.8

1.4.3

1.4.4

1.4.5

1.4.6

Specific guidelines or checklists
covering insurers’ activities in sectors
with high E&S risks and impacts havebeen issued by the supervisor.
Insurers are expected to integrate E&S
impact considerations in their decisionmaking, risk management processes
and policies.

Insurers are expected to put inplace an internal process to monitor
and address situations where
their insurance clients or investee
companies are not compliant with
the insurer’s E&S sector policies thatare based on applicable laws andregulations, or with internationallyrecognized science-based scenariosand findings (e.g., IEA 2050 scenario
outlining the immediate stop of
fossil fuel exploration and expansion
projects).

MICRO-PRUDENTIAL SUPERVISION (RULEBASED)

1.5.1

1.5.2

PORTFOLIO RISKS & IMPACTS

POLICIES & PROCESSESThe supervisor has included E&S
considerations in appointmentof board members of insurancecompanies.
Insurers are expected to define theroles and responsibilities of the board
involved in the oversight of the E&S
strategy.

Insurers are expected to conduct
regular training on relevant E&S issues
for their board, senior management,
business lines and functions, as well as
broader staff.
Insurers are expected to conduct
stakeholder engagement on relevant
E&S issues, incl. with civil society
representatives and consider theirviews on relevant E&S issues.

STRATEGY & GOVERNANCE
Insurers are expected to integrate E&S
considerations in their business andrisk strategy, consistent with the size
and nature of their operations.

Insurers are expected to include
E&S considerations in the roles
and responsibilities of most corefunctions (incl. senior management)in areas such as actuarial, investment,
underwriting, claims management andrisk management.

1.4.7

1.4.8

1.4.9

Insurers are expected to integrate
both short- and long-term E&S
considerations in their Enterprise Risk
Management framework (e.g., in their
Own Risk Solvency Assessment or
ORSA).
Solvency Capital Requirements
for insurers incorporate E&S
considerations, through adifferentiated risk-based approach.

1.5.3

Where applicable, the supervisor has
specific expectations for reinsurers,
reflecting their role as ultimate carriersof a number of systemic E&S risks.

1.5.4

Insurers are expected to integrate
E&S considerations and consumers'
E&S preferences when developing anddistributing new products.

DISCLOSURE & TRANSPARENCY
Insurers are expected to publicly
disclose how E&S considerations areintegrated in their business strategy,
governance (including remuneration),policies and risk management
processes.

Insurers are expected to continuallyassess, manage and mitigate thematerial negative E&S impacts
associated with their business
relationships, at the portfolio level.

1.6.1

Insurers are expected to set sciencebased climate targets and keep up todate with the latest climate science toalign their portfolios with the objectivesof the Paris Agreement.

1.6.2

Insurers are expected to publicly
disclose their time-bound transition
plans to reach set strategies andobjectives pertaining to E&S issues.

1.6.3

Insurers are expected to useinternationally recognizedsustainability reporting frameworks toguide their public disclosures.

1.6.4

Insurers are expected to include
information on their E&S strategy andits implementation in their annual
report, including non-achieved targets
and taken measures.

1.6.5

Insurers are expected to publicly
disclose their exposure by industry
sub-sectors, based on international
industry classification systems.

1.6.6

Insurers are expected to publicly
disclose the share of their total
portfolio that is aligned with existingclassification systems for sustainable orunsustainable activities (taxonomies).

1.6.7

Insurers are expected to report publicly
on their exposure to material E&S risks
and the associated mitigation measures.

1.6.8

Insurers are expected to report publicly
on the material negative E&S impacts
associated with their activities.

1.6.9

The supervision of conduct risk forinsurance products sold by insurers
includes provisions related to addressing
greenwashing risks.
Insurers are expected to seek external
assurance for their E&S public reportingand disclosures.

Insurers are expected to set sciencebased targets to mitigate negativeenvironmental impacts beyond climate,at the portfolio level.
Insurers are expected to analyse theimpacts of E&S considerations on
the concentration of risks between
investment and underwriting activities,
and to factor E&S risk in their assetliability management (ALM).
Insurers are expected to havespecific response plans for managing
significant additional claims associatedwith natural catastrophes.
Insurers are expected to assess andmitigate reputation and litigation risks
associated with E&S considerations.
Where insurers outsource their E&S
risk analysis to third parties, they are
expected to retain/exercise ultimate
oversight and control of these third
parties. Insurers are expected to validate
the analysis by third parties and be fully
accountable to any decisions influenced
by or derived from the analysis.

1.4.10The supervisor expects insurers toanalyse, and where necessary mitigate,
the concentration of E&S risks in theirportfolios

1.6.101.4.11The supervisor expects insurers to reflect
E&S risks in their pricing.

MACRO-PRUDENTIAL SUPERVISION

1.4.12

Insurers are encouraged to include in
their underwriting and pricing practices
incentives for their clients to enhancetheir resilience to E&S risks.

1.7.1

The supervisor has assessed theexposure of insurers to material E&S
risks and the implications for financial
system stability, by using forwardlooking scenario analysis and stresstesting.

1.7.2

The supervisor has published for
consultation its methodology forforward-looking scenario analysis andstress testing.

1.7.3

The supervisor has published theaggregated results of its stresstesting
exercises on material E&S risks, as wellas its recommendations.

1.7.4

The supervisor has developed specificrisk indicators and tools to monitor the
exposure of the insurance sector tomaterial E&S risks.

1.7.5

1.7.6

The supervisor has issued prudential
rules to limit the exposure of insurers
to certain activities, in order toprevent and protect against the buildup of systemic risk, based on E&S
considerations.
The supervisor has issued obligatory
insurance mandates (or similar binding
measures such as moratoriums on
non-renewals) in relation to E&S risks.

1.7.7

The supervisor monitors theconcentration of E&S risks between thevarious entities of integrated financialgroups (e.g., bancassurance).

1.7.8

Solvency Capital Requirements
for insurers incorporate a macroprudential buffer for systemic E&S
risks.

LEADERSHIP & INTERNAL ORGANISATION
1.8.1

The supervisor is a member of the
Network for Greening the Financial
System (NGFS) and the Sustainable
Insurance Forum (SIF).

1.8.2

The supervisor has published an
official E&S strategy or roadmap
outlining a science-based transition
plan with associated measures forcontributing to a net-zero and naturepositive financial sector, in line with its
mandate.

1.8.3

The supervisor has established aninternal organisation and allocatedresources to the implementation of its
E&S strategy or roadmap.

1.8.4

The supervisor has conductedstudies to assess insurers' exposure
to and management of E&S risks,and published its conclusions andrecommendations.

1.8.5

1.8.9

ENABLING ENVIRONMENT

3.1.1

A multi-stakeholder sustainablefinance initiative is in place, involving
representatives from the financial
industry, regulatory and supervisory
authorities, as well as from civil society.

3.1.2

The central bank, supervisor orbanking/insurance association is
supporting capacity building efforts forthe financial industry, on sustainablebanking and insurance practices andrelated aspects.

3.1.3

A classification system for sustainable
activities (taxonomy) is in place and has
been developed following a sciencebased and multi-stakeholder process.

3.1.4

A classification system forunsustainable activities (taxonomy)
is in place and has been developed
following a science-based and multistakeholder process.

3.1.5

Non-financial corporates are required
to report on current and planned
activities according to internationallyor nationally recognized sustainability
reporting standards and definitions.

3.1.6

Non-financial corporates are required
to publish science-based transition
plans.

3.1.7

A carbon pricing mechanism is being
implemented in the country.

3.1.8

There is a national-level sustainability
strategy, and financial institutions
encouraged to make and adhere to
net-zero transition plans.

3.1.9

Regulations or guidelines covering theissuance or provision of sustainablefinancial products are in place andare based on standards developed
following a science-based and multistakeholder process.

3.1.10Tax, regulatory or other incentives
are in place for insurers to finance orinsure certain industry sectors or todevelop new and innovative insurance
products, based on E&S considerations(for example supporting long-term
investments in illiquid assets such assustainable infrastructure or providing
performance warranty for renewableenergy solutions).

3.1.11

National Public-Private Partnerships
are in place to support the continued
provision of insurance covering E&S
risks (e.g., co-insurance pools).

3.1.12The country is part of regional disasterrisk reduction facilities.

The supervisor goes beyond measuring
conventional risk exposure to regularly
assessing the alignment of theinsurance sector to global sustainability
goals.

1.8.6

The supervisor provides training on
E&S issues to key staff, notably forsenior management and supervisorydepartments.

1.8.7

The supervisor has conducted andpublished studies to analyse thetransmission channels between E&S
risks and the economy and financial
system.

1.8.8

The supervisor actively supports
initiatives to address E&S data
availability and quality issues, including
through the promotion of open-source
solutions.

The supervisor organises the exchange
of information with reinsurers (e.g.,through joint working groups) toleverage their specific E&S expertise.

103

ANNEX 4:
REFERENCES
1. https://www.weforum.org/reports/new-nature-economy-report-ii-the-futureof-nature-and-business

32. https://www.federalreserve.gov/econres/feds/climate-change-and-doublemateriality-in-a-micro-and-macroprudential-context.htm

65. https://www.ngfs.net/sites/default/files/medias/documents/central_banking_and_supervision_in_the_biosphere.pdf

97. https://www.ngfs.net/sites/default/files/medias/documents/central_banking_and_supervision_in_the_biosphere.pdf

2. https://wwfint.awsassets.panda.org/downloads/wwf_gfri_roadmap__
august_2022_lores.pdf

33. As a note, the Corporate Sustainability Reporting Directive (CSRD) will be thefollow-up to NFRD

66. https://www.bis.org/bcbs/publ/d517.htm

3. https://www3.weforum.org/docs/WEF_New_Nature_Economy_Report_2020.
pdf

34. https://www.ngfs.net/sites/default/files/medias/documents/ngfs_guide_for_
supervisors.pdf

4. https://assets.publishing.service.gov.uk/government/uploads/system/
uploads/attachment_data/file/957629/Dasgupta_Review_-_Headline_
Messages.pdf

35. https://wwfint.awsassets.panda.org/downloads/wwf_gfri_call_to_action_2022_v10_21_sept.pdf

98. These are: Agriculture, Fishery and Livestock; Food and Beverage;
Manufacturing (paper, pulp, timber); Tourism, Travel and Hospitality; Utilities;
Mining and Quarrying; and Oil and Gas. See https://www.ngfs.net/sites/
default/files/medias/documents/central_banking_and_supervision_in_the_biosphere.pdf

5. https://news.un.org/en/story/2022/05/1117842
6. https://www.theguardian.com/environment/2022/sep/08/world-on-brink-fiveclimate-tipping-points-study-finds
7. https://wedocs.unep.org/bitstream/handle/20.500.11822/40875/EGR2022_
KR.pdf?sequence=3
8. https://www.ecb.europa.eu/pub/financial-stability/fsr/special/html/ecb.
fsrart201905_1~47cf778cc1.en.html
9. https://www.nationalgeographic.com/environment/article/sea-level-rise-1
10. In this report, E&S in general refers to climate, environment and social.
However, the assessment takes into account the distinction between climate
and environment where applicable. Environmental issues include biodiversity
loss, habitat destruction, deforestation, water, air and soil pollution, anddepletion of natural resources, and physical, transition and nature-related
related risk.
11. https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op285~be7d631055.en.pdf,
see also https://www.ngfs.net/sites/default/files/medias/documents/central_banking_and_supervision_in_the_biosphere.pdf

36. https://www.unepfi.org/wordpress/wp-content/uploads/2022/10/07-FinancialMarket-Readiness-Assessment-2.pdf
37. https://www.bis.org/bcbs/publ/d532.pdf
38. https://www.cisl.cam.ac.uk/resources/sustainable-finance-publications/banking-beyond-deforestation
39. https://www.ngfs.net/sites/default/files/medias/documents/central_banking_and_supervision_in_the_biosphere.pdf
40. https://www.bis.org/bcbs/publ/d532.pdf
41. https://tnfd.global/news/data-catalyst-launch/
42. https://www.bankingsupervision.europa.eu/press/pr/date/2022/html/ssm.
pr221102~2f7070c567.en.html
43. https://www.preventionweb.net/publication/guidelines-climate-targetssetting-banks
44. https://tnfd.global/news/tnfd-releases-third-beta-framework/
45. https://www.superfinanciera.gov.co/descargas/institucional/
pubFile1059701/20220428guiaadminriesgosclimaticos.pdf

12. https://www.fsb.org/2021/12/global-monitoring-report-on-non-bank-financialintermediation-2021/

46. https://www.nationalbanken.dk/en/knowledge_bank/themes/Pages/Climate.
aspx

13. https://www.ecb.europa.eu/press/pr/date/2021/html/ecb.
pr210922~59ade4710b.en.html

47. https://www.nationalbanken.dk/en/publications/Documents/2021/06/
ANALYSIS%20No.%2013%20-%20Flood%20risk%20can%20
potentially%20affect%20a%20large%20share%20of%20credit%20
institutions%E2%80%99%20exposures%20.pdf

14. https://www.bankingsupervision.europa.eu/press/blog/2022/html/ssm.
blog220428~6fc9bc7bb0.en.html
15. https://www.inspiregreenfinance.org/publications/quantifying-the-impact-ofgreen-monetary-and-supervisory-policies-on-the-energy-transition/
16. https://www.ipcc.ch/report/sixth-assessment-report-working-group-3/
17. https://wwfint.awsassets.panda.org/downloads/wwf_technical_background_report_2022.pdf
18. https://2degrees-investing.org/wp-content/uploads/2021/11/The-Cost-for-theFinancial-Sector-if-Firms-Delay-Climate-Action.pdf
19. https://www.worldbank.org/en/news/press-release/2021/07/01/protectingnature-could-avert-global-economic-losses-of-usd2-7-trillion-per-year
20. The insurance framework is available at https://wwf.panda.org/es/?6527441/
WWF-SUSREG-to--include-assessment-of-insurance-regulation-andsupervision-activities
21. For example, PILLAR III - Final draft implementing technical standards onprudential disclosures on ESG risks in accordance with Article 449a CRR.
22. For example, EBA Guidelines on loan origination and monitoring.
23. GDP in 2021 current prices (USD) https://data.worldbank.org/indicator/
NY.GDP.MKTP.CD
24. Total greenhouse gas emissions (kt of CO2 equivalent) in 2019 https://data.
worldbank.org/indicator/EN.ATM.GHGT.KT.CE
25. https://www.biodiversitya-z.org/content/megadiverse-countries
26. Regulations, supervisory expectations, guidance, or guidelines issued by thebanking regulator, supervisor, or national banking association.

48. https://www.nationalbanken.dk/en/about_danmarks_nationalbank/riskmanagement/Pages/Responsible-investments.aspx
49. https://fm.dk/media/25347/kingdom-of-denmark-green-bond-framework.pdf
50. https://www.nationalbanken.dk/en/publications/Documents/2021/06/
ANALYSIS%20No.%2013%20-%20Flood%20risk%20can%20
potentially%20affect%20a%20large%20share%20of%20credit%20
institutions%E2%80%99%20exposures%20.pdf
51. https://www.bankingsupervision.europa.eu/press/pr/date/2022/html/ssm.
pr221102~2f7070c567.en.html
52. https://www.bankingsupervision.europa.eu/press/pr/date/2022/html/ssm.
pr221102~2f7070c567.en.html
53. https://www.bis.org/bcbs/publ/d517.pdf
54. https://www.bis.org/bcbs/publ/d518.pdf
55. Aspettative di vigilanza sui rischi climatici e ambientali.
56. A quilombola is an Afro-Brazilian resident of quilombo settlements firstestablished by escaped slaves in Brazil.
57. https://cdn.cdp.net/cdp-production/cms/reports/documents/000/006/127/
original/2021_Climate_transition_plan_disclosure_FINAL.pdf?1647432846
58. https://www.cdp.net/en/campaigns/act-assessing-low-carbon-transitioninitiative
59. https://www.ngfs.net/sites/default/files/medias/documents/capturing_risk_
differentials_from_climate-related_risks.pdf

27. https://www.science.org/doi/10.1126/science.ade2017

60. https://framework.tnfd.global/wp-content/uploads/2022/11/TNFD_Scenarios_
Discussion-Paper_v0-3_A.pdf

28. https://www.unepfi.org/themes/ecosystems/nature-risk-no-longer-if-but-howand-where/

61. https://www.unepfi.org/wordpress/wp-content/uploads/2021/12/GoodPractice-Guide-to-Climate-Stress-Testing.pdf

29. https://www.ngfs.net/sites/default/files/task_force_nature_related_risks_mandate.pdf

62. https://www.dnb.nl/en/general-news/speeches-2022/speech-steven-maijooron-how-climate-related-and-environmental-risks-affect-banking-and-itsprudential-supervision/. See also https://www.esrb.europa.eu/pub/pdf/
reports/esrb.ecb.climate_report202207~622b791878.en.pdf

30. https://www3.weforum.org/docs/WEF_Embracing_the_New_Age_of_Materiality_2020.pdf
31. https://greencentralbanking.com/2022/08/15/issb-double-materialitydisclosure-standards/ and https://greencentralbanking.com/2022/07/15/
esma-calls-for-double-materiality-in-issb-standards/

104 | SUSREG ANNUAL REPORT 2022

67. https://www.bloomberg.org/press/climate-data-steering-committee-proposesrecommendations-for-the-development-of-first-ever-publicly-accessibleclimate-data-utility/
68. https://www.ssb.no/en/natur-og-miljo/areal
69. https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op285~be7d631055.en.pdf

99. https://www.ey.com/en_it/financial-services-emeia/how-the-insurance-sectorcan-drive-sustainable-finance

70. https://www.ngfs.net/sites/default/files/media/2021/06/17/ngfs_monetary_
policy_operations_final.pdf

100. https://www.iaisweb.org/uploads/2022/01/210930-GIMAR-special-topicedition-climate-change.pdf

71. https://www.wwf.eu/?6071441/Driving-sustainability-from-within

101. https://www.eiopa.europa.eu/document-library/report/report-non-lifeunderwriting-and-pricing-light-of-climate-change_en

72. https://neweconomics.org/uploads/files/ECB-QE-open-letter.pdf
73. https://neweconomics.org/2022/09/green-credit-guidance
74. https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.
pr220704~4f48a72462.en.html
75. https://wwfeu.awsassets.panda.org/downloads/pmu_wwf_credit_rating_report.pdf
76. https://www.bnm.gov.my/-/new-bnm-funds-sme-brf-lctf
77. https://www.ngfs.net/sites/default/files/worksteam_net_zero_for_central_banks_mandate.pdf
78. https://www.ngfs.net/sites/default/files/medias/documents/guide_on_climaterelated_disclosure_for_central_banks.pdf
79. https://www.omfif.org/wp-content/uploads/2022/07/OMFIF-GPI-2022-KEYFINDINGS.pdf
80. See also https://www.bis.org/publ/bppdf/bispap118.pdf and https://
ec.europa.eu/info/sites/default/files/business_economy_euro/banking_and_finance/211104-ipsf-common-ground-taxonomy_table-call-for-feedback_en.pdf81. UNEP’s “Nature in a haystack” examines how publicly available data on
nature-related issues can be used to support financial decision making. See
https://www.unepfi.org/wordpress/wp-content/uploads/2022/04/Nature-in-ahaystack.pdf
82. https://www.imf.org/en/Blogs/Articles/2022/05/19/blog-why-countriesmust-cooperate-on-carbon-prices; https://www.imf.org/en/Blogs/
Articles/2022/07/21/blog-more-countries-are-pricing-carbon-but-emissionsare-still-too-cheap; https://www.imf.org/en/Blogs/Articles/2022/11/04/gettingback-on-track-to-net-zero-three-critical-priorities-for-cop27
83. https://www.gfanzero.com/press/gfanz-launches-critical-resources-forfinancial-institutions-to-convert-their-net-zero-ambition-into-action/
84. https://greencentralbanking.com/2022/10/19/live-boe-climate-and-capitalframeworks-in-the-spotlight/
85. https://www.iaisweb.org/uploads/2022/01/210525-Application-Paper-on-theSupervision-of-Climate-related-Risks-in-the-Insurance-Sector.pdf
86. https://openknowledge.worldbank.org/handle/10986/37437, https://zenodo.
org/record/7075892#.Y2uAX8vMJPY, https://ipbes.net/media_release/Values_
Assessment_Published
87. https://www.pwc.com/us/en/industries/financial-services/library/next-ininsurance-top-issues/esg-insurance-industry.html
88. https://www.unepfi.org/industries/insurance/first-guidance-enabling-insurersto-identify-and-disclose-risks-from-climate-change-launches/
89. https://www.unepfi.org/industries/insurance/first-guidance-enabling-insurersto-identify-and-disclose-risks-from-climate-change-launches/
90. https://www.unepfi.org/industries/insurance/first-guidance-enabling-insurersto-identify-and-disclose-risks-from-climate-change-launches/
91. https://www2.deloitte.com/us/en/insights/industry/financial-services/
inclusive-and-sustainable-insurance.html
92. https://www.apra.gov.au/sites/default/files/2021-11/Final%20Prudential%20
Practice%20Guide%20CPG%20229%20Climate%20Change%20Financial%20
Risks.pdf

102. Such an approach would allow the financial institutions to better understandhow climate-related and environmental risks can or will affect theircounterparties over the short, medium, and long terms. See https://www.
ngfs.net/sites/default/files/medias/documents/capturing_risk_differentials_
from_climate-related_risks.pdf
103. https://www.eiopa.europa.eu/sites/default/files/publications/opinions/
opinion-on-climate-change-risk-scenarios-in-orsa.pdf
104. https://ukfinancialservicesinsights.deloitte.com/post/102hsew/climate-risksin-orsas-key-considerations
105. https://ukfinancialservicesinsights.deloitte.com/post/102hsew/climate-risksin-orsas-key-considerations
106. https://wwfint.awsassets.panda.org/downloads/wwf_susreg_if_2022_singles.
pdf
107. Insurance product innovation can support climate mitigation in nine priority
areas. The insurance is based on a double trigger: claims are paid either
in the event of excessive payments by the manufacturer or in the event of
the manufacturer’s insolvency, in which case the insurance is transferred tothe solar farm. Farms that buy panels from manufacturers with this type of
insurance can also benefit from lower costs of capital. See https://www.cisl.
cam.ac.uk/files/climatewise_climate_product_innovation.pdf
108. The Task Force received 42 survey responses from investors and other usersof climate-related financial disclosures. Given the relatively small sample
size, the Task Force recognizes the results may not be representative of thebroader population of users of climate-related financial disclosures. See
https://assets.bbhub.io/company/sites/60/2022/10/2022-TCFD-Status-Report.
pdf
109. https://www.oecd.org/environment/oecd-guidance-on-transition-finance7c68a1ee-en.htm
110. https://www.unepfi.org/wordpress/wp-content/uploads/2022/11/Version1.0-of-NZIA-Target-Setting-Protocol-For-Public-Consultation.pdf
111. https://www.eiopa.europa.eu/sites/default/files/publications/advice/eiopa-21-184-sustainability-non-financial-reporting-advice-art8-taxonomyregulation.pdf
112. https://www.unepfi.org/wordpress/wp-content/uploads/2021/12/GoodPractice-Guide-to-Climate-Stress-Testing.pdf
113. https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/
letter/2020/insurance-stress-test-2019-feedback.pdf
114. https://www.mckinsey.com/industries/financial-services/our-insights/climatechange-and-p-and-c-insurance-the-threat-and-opportunity
115. https://www.ngfs.net/sites/default/files/medias/documents/central_banking_and_supervision_in_the_biosphere.pdf
116. https://a2ii.org/en/knowledge-center/climate-riskdisaster-insurance/the-roleof-insurance-supervisors-in-climate-risk-insurance
117. https://www.eiopa.europa.eu/document-library/feedback-request/pilotdashboard-insurance-protection-gap-natural-catastrophes_en118. https://www.preventionweb.net/publication/innovative-insurance-productsadaptation-climate-change-iipacc-project-market
119. https://www.ccrif.org/?language_content_entity=en

93. https://www.apra.gov.au/information-paper-climate-risk-self-assessmentsurvey

63. https://www.bcb.gov.br/content/about/legislation_norms_docs/BCB_Risk%20
management%20and%20social%20environmental%20and%20climate%20
responsibility.pdf

94. https://www.apra.gov.au/sites/default/files/2021-09/Climate%20
Vulnerability%20Assessment_1.pdf

64. https://www.ngfs.net/sites/default/files/medias/documents/central_banking_and_supervision_in_the_biosphere.pdf

96. https://www.theinsurer.com/cop26/aviva-axa-and-scor-commit-to-enddeforestation-linked-investments/19156.article

95. https://www.ngfs.net/ngfs-scenarios-portal/

105

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