By Virginia Furness and Marc Jones

LONDON (Reuters) – The world’s forum for banking regulators published a framework for disclosing climate-related risks on Friday, making implementation voluntary, following pushback from the U.S.

The Basel Committee on Banking Supervision, comprised of banking regulators and central bankers from G20 economies and other countries, stated it would be up to national regulators to decide whether to require banks to disclose climate-related risks, a proposal that has been under discussion for years.

In a statement, the committee acknowledged that “the accuracy, consistency and quality of climate-related data are evolving, and therefore it is necessary to incorporate a reasonable level of flexibility into the final framework.”

Policymakers and banking regulators globally have debated how climate change should be integrated into regulation and central bank policy, which analysts believe will shape decision-making.

The framework asks banks to identify how climate risk could impact their financial returns and risk profile and to map their intended responses.

Banks are to consider both “physical risk” like flooding and heat stress, as well as “transition risk,” which includes changes to climate policy affecting agriculture.

In Europe, authorities have ramped up efforts to address climate-related risks, with the European Central Bank and others prioritizing climate risk management.

Conversely, in the U.S., efforts have been scaled back or shelved under President Donald Trump’s administration. For instance, in January, the Federal Reserve withdrew from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), the main global body focused on policing climate risk in the financial system, while many U.S. commercial banks dropped climate targets.

The updated framework follows an extensive consultation process that led to several changes to Basel’s original proposal, first published in November 2023.

In addition to emphasizing the voluntary nature of the proposal, the Basel Committee removed the requirement for banks to report on the carbon emissions associated with their capital markets activities and trading, known in the industry as “facilitated emissions.”

The committee stated it would monitor relevant developments, including the implementation of other reporting frameworks and disclosure practices, and consider whether any revisions to the framework would be warranted in the future.

(Editing by)