According to principle 2 of the Basel Committee on Banking Supervision principles on assigning responsibilities and oversight, the board and senior management need to have an adequate understanding, skills, and experience of climate-related financial risk management. Where necessary, banks should build capacity and train the board and senior management. This is in addition to:

• Responsibilities for managing climate-related financial risks clearly assigned to board members or committees.
• The Board and senior management having an adequate understanding of climate-related financial risks.
• Banks clearly define and explicitly assign roles and responsibilities throughout the bank’s organizational structure.

Things to Remember

• Principle 2 of the Basel Committee on Banking Supervision also emphasizes the importance of having a clear governance structure in place to oversee climate-related financial risks.
• Board members and senior management should regularly review and assess the effectiveness of the bank's strategies and processes for managing climate-related financial risks.
• Training and education programs should be provided to enhance the understanding of climate-related financial risks among board members and senior management.
• Regular reporting and communication channels should be established to ensure that the board and senior management are kept informed about climate-related financial risks and their management.