What aspect of climate change does Basel IV address?

What aspect of climate change does Basel IV address?

• A. Elimination of fossil fuels in banking
• B. Risk management and disclosure requirements
• C. Funding for renewable energy projects
• D. Positioning banks exclusively for climate change investments

Answer: (B)

Basel IV addresses risk management and disclosure requirements by enhancing the capital and liquidity framework for banks in response to various risks, including those related to climate change. The framework emphasizes the importance of identifying, measuring, and managing risks that could arise from environmental changes and the transition to a low-carbon economy. It calls for banks to adopt more rigorous practices that enable them to assess the financial impacts of climate-related risks, thus improving their resilience and sustainability. While other options may touch on relevant concepts in the broader context of climate sustainability, they do not accurately reflect the specific content of Basel IV. For instance, the regulation does not mandate the elimination of fossil fuels or positioning banks exclusively for climate change investments. Instead, it focuses on ensuring that banks incorporate climate risks into their overall risk management strategies and provide transparent disclosures related to these risks, thereby enhancing the stability of the financial system in the face of environmental challenges.

Basel IV addresses risk management and disclosure requirements by enhancing the capital and liquidity framework for banks in response to various risks, including those related to climate change. The framework emphasizes the importance of identifying, measuring, and managing risks that could arise from environmental changes and the transition to a low-carbon economy. It calls for banks to adopt more rigorous practices that enable them to assess the financial impacts of climate-related risks, thus improving their resilience and sustainability.

While other options may touch on relevant concepts in the broader context of climate sustainability, they do not accurately reflect the specific content of Basel IV. For instance, the regulation does not mandate the elimination of fossil fuels or positioning banks exclusively for climate change investments. Instead, it focuses on ensuring that banks incorporate climate risks into their overall risk management strategies and provide transparent disclosures related to these risks, thereby enhancing the stability of the financial system in the face of environmental challenges.