WASHINGTON, D.C.— Better Markets’ filed a Comment Letter to the Basel Committee on Banking Supervision (Committee) on the role of climate scenario analysis in strengthening the management and supervision of climate-related financial risks.

Why it Matters. Our economy, financial system, banks, and citizens are increasingly threatened by all kinds of risks, including those that stem from severe weather and other climate-related events. Investors, regulators, policymakers, and members of the public deserve to have the necessary information to understand banks’ exposure to these risks clearly and confidently.

What we said. We supported the Committee’s development of international standards that provide foundational principles for supervision and management of climate-related financial risks. We applaud the Committee’s continued efforts in pursuit of climate scenario analyses that are plausible, contain minimum levels of severity, and are supported by internationally agreed-upon scientific projections.

Bottom Line. The Basel Committee should take the next step to add even more specificity and metrics that would promote consistency and reasonableness to scenario analysis results. While some discretion is appropriate to allow banks to account for unique characteristics, the Committee must ensure that climate scenarios are structured in a way that yields useful and informative results. Allowing too much discretion or variability for the design of scenarios or their data inputs will render the results of climate scenario analysis useless.”

You can read the full comment letter here.