Knowledge about the impact of climate change on people's living conditions and the economic system is growing all the time, but it is still not good enough. This is also true of its impact on the financial system. This is a serious shortcoming, both because there is reason to believe that the negative effects on the financial system could be significant, and because the financial system itself has an important role to play in mitigating and managing the effects of climate change. Financial reporting, like international accounting rules, has been harmonised for a long time. However, sustainability reporting is still not standardised and lacks harmonised definitions, making it difficult to compare and use sustainability reports.

Internationally, intensive work is therefore under way on risks related to sustainability and climate change, in which the Riksbank is actively participating.^[11] See the Riksbank's Climate Report (2021) for a description of the Riksbank's climate-related work. Several parallel tracks with new sustainability standards are being developed by various organisations to increase transparency on climate-related risks. Different standards are being developed in the EU, globally and in the United States. Table 1 below provides an overview of ongoing transparency projects on sustainability and climate.

Since 2017, the Task Force for Climate-related Financial Disclosures (TCFD) has made recommendations for climate-related risk disclosures, but compliance is voluntary.^[12] The TCFD was created in 2015 at the initiative of the Financial Stability Board (FSB) and its recommendations were developed through private sector collaboration. Many of the sustainability standards now under development build on the work of the TCFD. The Basel Committee has also developed principles on how banks should manage climate risks.^[13] See Principles for the effective management and supervision of climate-related financial risks (bis.org). The European Banking Authority has recently introduced requirements for increased transparency on climate-related risks in the EU Pillar 3. In short, this means that European banks must disclose both physical risks and transition risks in a standardised format.^[14] These include both physical risks, such as sea level rise, which could affect mortgage or property prices, and transition risks, which could affect the ability of companies in carbon-intensive industries to obtain loans. Banks will start disclosing these risks under Pillar 3 in 2023. European companies are also subject to the Non-Financial Reporting Directive (NFRD), which requires certain large companies to disclose environmental and social sustainability factors in a sustainability report. Work is currently under way to replace the NFRD with a new directive, the Corporate Sustainability Reporting Directive, CSRD, which covers all large companies and all listed companies in the EU, introduces detailed sustainability disclosure requirements, standardises the information and makes it comparable. The information will then need to be audited by an external party.

One problem with the existence of several parallel international standards on sustainability is that it can be difficult to know which requirements should apply and that different requirements in different standards are not aligned with each other. They also need to use definitions in the same way. Many banks and companies are active internationally and may therefore need to comply with multiple standards. It is therefore important that the various organisations producing the new regulations, such as the IFRS Foundation, EFRAG, the European Banking Authority and the European Commission,^[15] The IFRS Foundation is a global not-for-profit accounting organisation and its Sustainability Board ISSB is responsible for producing the IFRS Sustainability Report. EFRAG is the European Financial Reporting Advisory Group and develops the European sustainability reporting standard called ESRS, which is based on CSRD. work together to ensure that the information is useful and understandable to stakeholders.