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Climate change, financial risks and reporting: distant horizons?

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18 p.
The notes to financial statements and, in the case of credit institutions, Pillar 3 reports complete and supplement information contained in the balance sheet and income statement. This helps to provide a better estimate of the amount and timing of expected cash flows, and of the associated risks. The climate change challenge introduces new factors that affect the materialisation of those risks, and standards are being developed, from different vantage points and by various organisations, aiming to specify the type of public information –in addition to the notes to financial statements and Pillar 3 reports –that could provide a better picture of these factors. This article presents an overview of the initiatives under way to address the disclosure of climate-related financial risks, focusing on the main international work streams promoted by the International Financial Reporting Standards Foundation, the European Financial Reporting Advisory Group and the US Securities and Exchange Commission. It sets out the context and rationale behind the proposals, their current status and their main content. It also discusses the mechanisms being considered to make the initiatives interoperable and to link this type of information with that provided in the financial statements, in order to prevent fragmentation that could affect financial stability.
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Financial Stability Review / Banco de España, 44 (Spring 2023), p. 93-110
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