Global Banking Watchdog Proposes Mandatory Climate Disclosures for Banks from 2026

In a significant move towards enhanced transparency, a global banking watchdog, the Basel Committee, has recommended that banks commence detailed reporting on the impacts of climate change on their operations. Starting January 2026, the proposal aims to facilitate investors and regulators in assessing how banks are managing climate-related risks.

The Basel Committee, consisting of banking regulators from G20 and other economies, suggests that climate-related disclosures will not only aid investors in comparing climate exposures among different banks but also ensure that banks maintain sufficient capital for stability.

Acknowledging the evolving nature of climate-related data with varying coverage, the watchdog expressed its commitment to incorporating flexibility into the framework. The proposed disclosures are expected to accelerate the availability of climate-related data, addressing existing gaps.

Following a public consultation, the committee will decide which disclosures should be mandatory and which can be left to the discretion of national banking regulators. These proposed disclosures are designed to complement broader corporate disclosures agreed upon globally by the International Sustainability Standards Board (ISSB).

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While ISSB disclosures may not be universally adopted, the Basel Committee’s proposed framework aims to provide more detailed climate-related disclosures within the banking sector. The challenge lies in coordinating these disclosures with finalized corporate climate disclosures mandated by the European Union.

Notably, the Basel framework includes three scopes of emissions: Scope 1 covers a bank’s direct emissions, Scope 2 includes indirect emissions from energy purchases, and Scope 3 incorporates emissions produced by a company’s customers, known as financed emissions. This comprehensive approach is in contrast to draft U.S. corporate climate disclosures facing resistance, particularly regarding the inclusion of Scope 3 emissions.

The committee’s recognition of the challenges banks face in obtaining data from counterparties underscores the complexity of implementing robust climate-related disclosures. As the financial sector grapples with evolving climate standards, the Basel Committee’s proposal signals a crucial step towards aligning banking practices with climate-conscious initiatives. The decision on mandatory disclosures, expected after public consultation feedback, will shape the future landscape of climate transparency in the global banking sector.