Basel Committee’s Voluntary Climate Disclosure Framework: Implications for the UK, EU and beyond

Introduction

On 13 June 2025, the Basel Committee on Banking Supervision (Basel Committee) published a framework for its 28 member countries for disclosing climate-related financial risks (Basel Framework). This follows a consultation published in November 2023 (Consultation). Initially, the intention had been to integrate climate disclosures under Pillar 3 of the Basel accords, the Basel Committee’s series of prudential and capital rules for banks which relate to disclosure requirements. However, the final Basel Framework is now separate and instead voluntary. 

In this blog, we have briefly outlined the Basel Framework’s recommendations, as well as the existing requirements for climate-related financial risk disclosures in certain Basel Committee member jurisdictions and the likelihood of the Basel Framework being implemented by such jurisdictions.  

Overview of the Basel Framework

The Basel Framework recommends disclosure of both qualitative information and quantitative metrics:

• Qualitative information on the governance, strategy and risk management used to oversee material climate-related financial risks, as well as on details of transition risk, physical risk and concentration risk. 
• Quantitative metrics (disclosed in templates) on physical risk and transition risk, including a breakdown of the bank’s Scope 1, 2 and 3 greenhouse gas emissions (GHG) for material sectors, financed emissions, and gross carrying values subject to climate change physical risk by geographic region.

The Basel Committee has acknowledged that the accuracy, consistency and quality of climate-related data are evolving. Consequently, the Basel Framework incorporates a reasonable level of flexibility. Additionally, the Basel Committee noted that it will be monitoring relevant developments, such as the implementation of other reporting frameworks and disclosure practices by internationally active banks in member jurisdictions, to consider whether any revisions to the Basel Framework may be needed in the future.

Impact on existing and future regulation across member jurisdictions

It has been widely reported that the decision to make the implementation of the Basel Framework voluntary is a result of US influence.[1] As a voluntary framework, the Basel Framework allows for a wide divergence in political environments across its member countries, in recognition of the varied degrees of commitment to implement measures to mitigate and monitor climate-related risks.[2]

Some member jurisdictions have of course already put in place climate-related financial risk disclosure frameworks for banks. We have outlined the relevant UK and EU disclosure requirements below, including how they compare with the Basel Framework.

UK

In the UK, the key rules and expectations on climate-related financial disclosures are found in the Prudential Regulation Authority’s (PRA) Supervisory Statement SS3/19, and subsequent publications and ‘Dear CEO’ letters. SS3/19 was published in April 2019 and sets out expectations on managing climate-related financial risks, separated into ‘physical risk’ and ‘transition risk’. It applies to all UK banks and PRA designated investment firms, insurance and reinsurance firms, and building societies. SS3/19 addressed climate risk through four key aspects: governance, risk management, scenario analysis, and climate-related data disclosures.

The PRA recognises that banks have existing obligations under Pillar 3 to disclose information on material risks, and notes that firms should engage with, e.g., the Climate Financial Risk Forum and the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations[3] in developing their approach to climate-related financial disclosures. SS3/19 expectations are applied in addition to these Pillar 3 requirements, where such application is necessary to reflect the specific climate risks a firm may be managing.

The PRA issued a consultation paper (CP10/25) in April 2025 with proposed updates to SS3/19 (please refer to our blog post for additional information). However, this consultation did not propose substantive changes to the PRA’s expectations on climate-related disclosures, and simply suggests replacing references from TCFD to the new UK Sustainability Reporting Standards. The PRA has acknowledged concerns that the proliferation of new disclosure requirements by multiple regulators is likely to place additional operational strain on banks and other firms, which in turn could undermine the quality of disclosure. The PRA’s approach is to align its expectations with existing/anticipated disclosure requirements, rather than add to this burden.

In summary, the PRA expects banks (and other firms) to make disclosures in line with the TCFD’s recommendations and the standards set under SS3/19 (and successor publications). Helpfully, the UK rules and the Basel Framework cover the same key topics: governance, strategy, risk management, and metrics and targets. However, there are some notable differences in approach:

• Whilst the TCFD recommendations applicable in the UK do not expressly require the publication of a transition plan, they encourage disclosure of key elements of transition plans, particularly in relation to strategy and targets and metrics. Unlike the Basel Framework, this recommendation is not conditional on whether the organisation has already published a transition plan.
• The TCFD recommends that all organisations disclose their Scope 1 and 2 GHG emissions. In contrast, Scope 3 GHG emissions are subject to a materiality assessment. The approach under the Basel Framework is to recommend disclosure of Scope 1, 2 and 3 GHG financed emissions for material sectors. However, unlike the TCFD, the Basel Framework leaves it to the discretion of banks to define what ‘material’ means.

EU

In the EU, climate-related financial risk disclosures are governed by a mix of prudential regulations and broader sustainability reporting frameworks. The new Article 449a[4] of the Capital Requirements Regulation (CRR) requires EU credit institutions to disclose ESG risks, including climate-related financial risks, in line with Pillar 3 templates developed by the European Banking Authority (EBA). These disclosures include both qualitative and quantitative data such as governance structures, transition and physical risk exposures and the Green Asset Ratio (GAR).

There is substantial alignment between the EU Disclosure Requirements and the Basel Framework, particularly in terms of content of disclosure. Both regimes, for instance, largely cover the same core themes of governance, strategy, risk management, metrics and targets. However, the EU regime is more prescriptive and standardised compared to the Basel Framework:

• Under the CRR, banks are required to publish granular data – such as the GAR, Banking Book Taxonomy Alignment Ratio (BTAR), detailed Scope 1–3 GHG emissions, and taxonomy-aligned financial metrics – using fixed templates and defined methodologies. Banks are required to report their credit quality of exposures, emissions, and residual maturity in a fixed “Template 1”. This template breaks down the disclosures by sector based on the EU Nomenclature of Economic Activities (NACE) codes. By contrast, the Basel Framework provides more high-level guidance, allowing banks a greater level of discretion to determine methodologies, the materiality threshold for inclusion and the definition of sector or industry.  

• Under the CRR, the GAR is a comparable ratio introduced under Pillar 3 reforms to determine an entity’s relative investment in green assets. Whilst the quantitative disclosure requirements under the Basel Framework generally cover the same ground the Basel Framework stops short of requesting specific enough information to enable comparisons of a GAR. 

It is worth noting that the European Commission recognises the administrative burden that current key performance indicators (KPIs) such as the GAR disclosures place on banks. For this reason, the Commission proposes to amend the Taxonomy Disclosures, Climate and Environmental Delegated Acts by introducing a 10 percent threshold for economic activity to avoid reporting on non-material assets and by extending the period in which banks are exempt from detailed taxonomy KPI reporting requirements for two years, until 31 December 2027. Similarly, the EBA launched a consultation in May 2025 on proportionate technical standards to amend its Pillar 3 disclosures framework. 

Conclusion

The evolution of the Basel Framework and developments in the EU and the UK in this area are indicative of a broader trend towards voluntary or reduced mandatory climate-related disclosures. As Basel Committee member jurisdictions, the UK and EU will have both been involved in the development of the Basel Framework, and so it is unsurprising that the equivalent UK and EU regimes on climate-related disclosures for banks and other institutions are broadly aligned with the final Basel Framework. The Basel Framework is likely to be key for jurisdictions that have yet to implement mandatory climate-related financial risk disclosures for banks. 

[1]ESG Today 

[2] Mark Segal, “Basel Committee Releases Voluntary Framework for Banks’ Disclosure of Climate Risks”, ESG Today, 16 June 2025, https://www.esgtoday.com/basel-committee-releases-voluntary-framework-for-banks-disclosure-of-climate-risks/.

[3] The TCFD’s recommendations and guidance can be found here: https://www.fsb-tcfd.org/publications/

[4] Introduced under Regulation (EU) 2024/1623 (CRR 3) and applicable since January 2025.