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Climate governance frameworks - Prudential Authority aligns SA with IFRS, BCBS and IAIS
Business Brief
|BusinessBrief December/January 2025/26
Climate risk management requires ongoing capacity building and capability development, especially for banks and insurers that are highly susceptible to climate-related risks.
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The South African financial sector is particularly exposed to both financial and non-financial impacts because of exposure to climate-sensitive sectors. The disclosure of climate-related risks and opportunities is therefore critical to ensure that meaningful information is available to stakeholders for the assessment, pricing and management of such risks.
There is an evolving body of voluntary frameworks to regulate the disclosure of climate and sustainability-related information, notably the standards developed by the International Sustainability Standards Board - IFRS S1 and S2.
The Basel Committee on Banking Supervision (BCBS) has recently published a voluntary framework for the disclosure of climate-related financial risks, which is intended to be considered by jurisdictions and ultimately implemented domestically. The framework recognises the multiple qualitative and quantitative metrics needed to form a comprehensive picture of banks' exposure to climate-related financial risks, given the significant impact of climate change on traditional risk categories.
South Africa's financial sector regulators have previously taken steps to promote the voluntary disclosure of climate-related risks within the financial services sector. On 10 May 2024, the Prudential Authority (PA) published Guidance Note 2 of 2024 (G2/2024) and Guidance Note 3 of 2024 (G3/2024), which outlined the principles and foundations for climate-related disclosures by insurers and banks, broadly aligned with IFRS standards.
Following the publication of the International Association of Insurance Supervisors' (IAIS) application paper on the supervision of climate-related risks in the insurance sector and BCBS's framework for voluntary disclosures for banks (June 2025), the PA published Guidance Notes 3 of 2025 (G3/2025). This updated guidance replaces G2/2024 and G3/2024 and provides revised direction on climate disclosures for insurers and banks (replacing).
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