In December 2023, the Basel Committee on Banking Supervision had introduced proposals which require major banks to disclose information about whether their lending and investments led to emissions. But the FT reported last week that US regulators were putting pressure on other banking rule-makers to dilute the powers of the Basel Committee. According to the report, it was the latest sign of the US’s pushback and eventual retreat from the agreement since Donald Trump’s return to the White House.

But in a meeting of the Group of Central Bank Governors and Heads of Supervision (GHOS) on Monday, attendees reaffirmed the “expectation to implement Basel III and discuss work on financial impact of extreme weather events,” the Bank for International Settlements (BIS) said in a press release.

The Basel Committee, which reports to the Group of Central Bank Governors and Heads of Supervision, is a global standard setter for the prudential regulation of banks.

It has a mandate “to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability.”

According to the press release, the Basel Committee will also prepare and publish a “voluntary disclosure framework on climate related financial risk,” which will then be shared with jurisdictions for consultation.

US pushback

Regulators and policymakers in the US and EU are not on the same page when it comes to the scope and implementation of the Basel Committee’s proposals on climate change.

According to Reuters, EU regulators are keen to prioritize climate-related risks in the banking sector. The European Central Bank (ECB) has made the management of climate-related risks a key priority.

In the US however, and especially in the aftermath of Donald Trump’s return as President, the subject is no longer a priority matter and efforts have been scaled back or shelved. In January this year, the US Federal Reserve announced it was withdrawing from a global body of regulators which was tasked with identifying climate risks in the financial sector.

The Fed faced criticism at the time for the decision to withdraw from the Network for Greening the Financial System (NGFS), and was accused of bowing to political pressure despite being an independent body.

And in March, the US Treasury Department’s Office of the Comptroller of the Currency (OCC) withdrew some of its own principles which provided guidelines to major US banks on climate related risks.

“The principles providing guidance to banks for climate-related financial risk are overly burdensome and duplicative,” the OCC said in a statement at the time.

The US is represented on the Basel Committee by the the Federal Reserve Bank, the New York Fed, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.

Global response

The Trump administration has gone beyond undermining the Basel Committee and instructed all government bodies and agencies such as the World Bank and the IMF “to ditch their focus on climate-related issues,” according to the FT.

But policymakers in the EU and the UK, as well as independent experts have argued in favour of the Basel Committee’s proposals and defied US pressure.

For example the Bank of England (BeE) has said: “Climate risks are incorporated within the Bank’s internal governance and risk management frameworks, complemented by climate-specific processes where appropriate.”

The BoE has set itself a net-zero target for physical operations by 2040, and claims to have “improved the specificity of our carbon footprint from physical operations by working with our suppliers to gain an improved understanding of their greenhouse gas emissions.”

And in the EU, investors have called upon regulators in the bloc to stick to their green finance goals and not give in to political pressure from the Trump administration.

Benoît Lallemand, secretary-general of the lobby group Finance Watch, was quoted by the FT saying: “Disbanding the Basel committee’s climate task force would send the absurd signal that climate risks are no longer a concern for financial stability, just as extreme weather, credit losses and asset repricing accelerate.”