Civil Society Open Letter to Bank for International Settlements and Basel Committee

One year on amidst increasing flooding, heat waves and other extreme weather events, there is more urgency than ever to reform the global prudential framework, but we have, however, not seen sufficient action from the BIS and its members yet. On the contrary, we have reason to believe that even minimalistic ambitions outlined by the BIS-hosted-organisations to respond to climate-related financial risk are being obstructed by US domestic politics, against the consensus of the wider BIS membership in the various working groups.

We understand you are facing various challenges, but allowing the US prevent you from fulfilling your mandate is unacceptable and poses risk to global financial stability. This context makes the work of the BIS and hosted organisations even more necessary. 

In the name of our organisations and the 80,000 people who signed, we are calling for increased efforts to reform the prudential framework by focusing on the following areas:

1. Disclosure Standards: Continue to work on the standard on disclosure of climate-related financial risks with special attention to the integration of transition plans.
2. Transition Plans: Build on the work undertaken by supervisors in the NGFS, establish a common standard for transition planning and transition plans as prudential and supervisory tools to manage climate-related risks.
3. Scenario Analysis: Recognise that scenario analyses need significant improvement before their results can be reliably used to measure risk and determine the ambition and timeline for the net zero transition; Use economic models based on climate science to estimate the true cost of climate change and cost of missing or delayed transition.
4. Capital Requirements: Review the capital framework to incorporate climate risk, specifically addressing higher capital requirements for fossil fuel related assets, which represent high transition risk and a source of systemic physical risk. 
5. Extended sustainability considerations:  Incorporate the risks related to critical ecosystem services and human rights abuses into the Basel Framework. This should include the obligation for banks to conduct due diligence and comply with the Free, Prior and Informed Consent (FPIC) and binding prior consultation for the financing of all extractive projects. 

Crucially, these reforms should be implemented through:

1. Collaboration: Collaborate more closely with climate scientists and biodiversity experts to bridge the gap between economics and science;
2. Inclusive Engagement: Institutionalise dialogue with Civil Society Organisations (CSOs),  think tanks and delegates of affected communities particularly from the Global South.
3. Equitable representation: Increase the representation of Global South countries in the BIS membership to ensure equitable participation in the shaping of global financial policies;

To summarise, we call on the BIS and the organisations it hosts to implement global prudential regulations that prevent further climate breakdown and avert another financial crisis. The resilience of our social and financial systems requires a progressive and effective transition to carbon neutrality and a nature-positive, fair economy. Please prioritise people and planetary boundaries over financial institutions' profits.

Please let us know how you plan to work to implement these demands. We remain open to dialogue and collaboration to shape global prudential reform.

Sincerely,

Climate Alliance, Switzerland

Ekō, Global

Breakfree, Switzerland

Campax, Switzerland

Co-signed by : 

Positive Money Europe, Belgium

New Economics Foundation, United Kingdom

British Black Anti Poverty Network, United Kingdom

End Fossil Occupy Uganda, Uganda

Debt for Climate, Swiss Chapter

Cerca Research & Design Lab, Switzerland

SIS, Brazil

Mothers Rise Up, United Kingdom 

Instituto Ambientalista Natura, Perú

CRY-GEAM (Corporación Regional Yariguíes-Grupo de Estudios Sociales, Extractivos y Ambientales del Magdalena Medio), Colombia

ONIC (Organización Nacional Indigena de Colombia), Colombia

Africa Institute for Energy Governance (AFIEGO), Uganda

Contact:

Daphne Cronin, daphne@eko.org