Bangladesh Bank has issued a comprehensive guideline on sustainability and climate-related financial disclosures for banks and finance companies. This initiative is part of a broader effort to ensure transparency and resilience in the financial sector, aligning with global standards and supporting the transition to a sustainable economy.
Objective
The primary objective of this guideline is to require banks and finance companies to disclose information about their sustainability and climate-related risks and opportunities. This information is crucial for stakeholders making decisions about resource allocation and is intended to mobilize private sector funds for sustainability and climate finance.
Standards and Scope
The guideline is based on the International Financial Reporting Standards (IFRS) S1 and S2, which provide a framework for disclosing sustainability and climate-related financial information. The scope covers all banks and finance companies operating in Bangladesh, requiring them to report on their exposure to sustainability-related risks and opportunities and their strategies for managing these risks.
Disclosure Requirements
Banks and finance companies must disclose material information about sustainability-related risks and opportunities that could impact their financial performance. This includes information on their dependencies on environmental, social, and governance (ESG) factors and the potential impacts of these factors on their business operations. The disclosures should follow the Global Industry Classification Standard (GICS) and adhere to international best practices.
Climate-Related Disclosures
The guideline outlines specific requirements for climate-related disclosures, structured around four pillars: governance, strategy, risk management, and metrics and targets. Banks and finance companies must report on their exposure to physical and transition risks from climate change, as well as the opportunities that a lower-carbon economy presents.
Regulatory Reporting
Banks and finance companies are required to submit their sustainability and climate-related disclosures to Bangladesh Bank on a semi-annual basis, no later than January 31 and July 31 each year. These disclosures should also be included in their annual reports, starting from the financial year beginning in January 2024.
Assurance
The guideline mandates limited assurance of the reported information in the annual reports. This assurance is crucial for maintaining the credibility and reliability of the disclosed information.
Awareness and Capacity Building
To support the implementation of these guidelines, Bangladesh Bank emphasizes the importance of awareness and capacity building. Banks and finance companies are encouraged to conduct training programs and awareness events for their staff, customers, and other stakeholders. This includes developing action plans and strategies for effectively managing sustainability and climate-related risks.
Conclusion
The guideline on sustainability and climate-related financial disclosure is a significant step towards enhancing the transparency and resilience of Bangladesh’s financial sector. By aligning with international standards, it aims to support the transition to a net-zero economy and mobilize private sector funds for sustainable development. The disclosure of sustainability and climate-related risks and opportunities will help market participants make informed decisions and contribute to the overall goal of achieving national and global sustainability targets.
