De Cos suggests that ECB could mandate climate risk disclosure

The European Central Bank (ECB) is considering mandating climate risk disclosure conditions in its criteria for buying corporate bonds and accepting collateral for lending, according to respected banker Pablo Hernandez de Cos.

De Cos is the current governor of the Bank of Spain and chairman of the Basel Committee on banking supervision.

“Central banks have a balance sheet, we have assets generated by our monetary policy activity,” Hernandez de Cos told a panel organised by Spain’s Energy and Environment Ministry.

“We could potentially make our purchases of corporate bonds, or our collateral… conditional on the companies whose bonds we are going to buy meeting established conditions on releasing information that obviously also helps us in the fight against climate change.”

The move would be a significant one given that the ECB’s guiding principle has been one of market neutrality, without a stipulation regarding climate risk disclosure.

“Central banks have a duty to internalise (borrowers’) physical and transition risks and we will do so,” De Cos added.

The sentiments expressed by De Cos echo the current mood music regarding climate risk disclosure for financial markets by supervisory bodies.

Last month the UK’s financial Conduct Authority (FCA), for example, published new proposals on climate-related disclosure rules for listed companies and certain regulated firms saying the current rules do not meet the needs of investors of clients.

The proposals follow the introduction of climate-related disclosure rules for the most prominent listed commercial companies in December 2020 which are aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).

In the consultations the FCA is proposing:

  • to extend the application of its TCFD-aligned Listing Rule for premium-listed commercial companies to issuers of standard listed equity shares.
  • to introduce TCFD-aligned disclosure requirements for asset managers, life insurers, and FCA-regulated pension providers, with a focus on the information needs of clients and consumers.

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