15th February 2022, Manama, Kingdom of Bahrain | Aligned with its role as an advocate of the Islamic financial services industry (IFSI), the General Council for Islamic Banks and Financial Institutions (CIBAFI), the global umbrella of Islamic financial institutions, announced that it has submitted its comments to the Basel Committee on Banking Supervision’s (BCBS) Consultative Document (CD) on “Principles for the effective management and supervision of climate-related financial risks”.
The CD has been issued on 16th November 2021 and was open for public consultation until 16th February 2022.
In its comments, CIBAFI thanked the BCBS for giving the opportunity to the IFSI to comment on the CD and provided collective feedback of its member banks from over 34 jurisdictions. CIBAFI’s comments comprised the following key points.
First, CIBAFI noted that the CD requires banks to develop qualitative or quantitative metrics or indicators to assess, monitor, and report climate-related financial risks. CIBAFI and its members noted that not all banks may have resources to develop their own metrics or indicators. Thus, it is recommended that the Principles should also encourage the adoption of pre-existing qualitative or quantitative metrics or indicators, developed by international institutions/bodies, that can help banks to measure and report climate-related financial risks.
Second, the CD refers to the identification, monitoring and reporting of “material” climate-related financial risks. In this regard, CIBAFI and its members recommended giving banks guidance on the assessment of the materiality of climate-related financial risks since it constitutes a new activity for many banks.
Third, CIBAFI noted that it is possible that some jurisdictions will have their own strategies or regulatory guidelines for the management of climate-related financial risks. CIBAFI therefore recommended adding to the supporting text a reference to the need to take into account any such strategies or guidelines in addition to these Principles to ensure harmonisation of practices.
The submitted comments also included comments on other aspects that could benefit from additional guidance or consideration from the Committee for the effective management of climate-related financial risks and its supervision.
Full comments submitted to the BCBS are available on CIBAFI’s website: http://www.cibafi.org.
In addition to Advocacy of Islamic finance Values and related Policies & Regulations, CIBAFI continues to support the IFSI through various activities and initiatives. These include providing industry stakeholders with a platform to discuss emerging issues, representing the industry at major global financial events, and sharing knowledge through specialized publications and comprehensive training programmes.