The financial system needs to be transparent for investors to be able to obtain information about underlying risks. During the global financial crisis, however, it became clear that there were problems with a lack of transparency. Many banks experienced liquidity shortages and investors were unable to assess which banks had significant payment problems. As banks had significant links to each other, this caused confidence problems and contributed to stress in the financial system. As a result, the Basel Committee undertook major revisions to transparency requirements after the financial crisis.

New risks are emerging in the financial system that investors and other stakeholders need to understand as they evolve. Climate change is one source of such risks. In order to effectively measure and manage climate-related risks, governments and international organisations need to cooperate, develop consistent standardised frameworks and increase transparency. Banks also have a major role to play in this work and need to improve their transparency on climate-related risks. Improved transparency can also contribute to economic development and reduce the risk of financial crises.

Niklas Frykström^[1] Thanks to David Forsman, Mattias Hector and Camilla Ferenius for valuable comments. The views expressed in Economic Commentaries represent the authors' own opinions and are not to be regarded as an expression of the Riksbank’s view on the issues concerned. The author works at the Riksbank's Financial Stability Department