FINMA, Switzerland’s independent financial-markets regulator, announced that the country’s banks and insurers will be required to provide disclosures relating to their exposure to climate risk, and their processes for assessing and managing those risks.

The disclosure rules for banks and insurers will be based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD was established by the Financial Stability Board in 2015, with the goal of developing consistent disclosure standards for companies, in order to enable investors and other stakeholders to assess the companies’ climate-related financial risk. The recommendations were published in June 2017.

The move by the Swiss regulator comes as sustainability and climate reporting requirements are increasing in jurisdictions across the globe. The UK announced in November last year that it will implement mandatory TCFD-based climate disclosures economy-wide by 2025, and the EU recently strengthened its own Non-Financial Reporting Directive (NFRD), requiring more companies to disclose information on the way they operate and manage social and environmental challenges. In the U.S. last month, President Biden signed an executive order calling on regulators to consider plans to improve climate-related disclosures, and to incorporate climate-related financial risk into regulatory and supervisory practices.

According to the new statement by FINMA relating to banks and insurers:

“In future, the affected institutes should describe the major climate-related financial risks and their impact on the business strategy, business model and financial planning (strategy). In addition, they must disclose the process for identifying, assessing and managing climate-related financial risks (risk management) as well as quantitative information (including a description of the applied methodology) on their climate-related financial risks. Finally, the institutes must describe the central attributes of their governance structure in relation to climate-related financial risks.”