Basel-based Financial Stability Board warned in its 2025 progress update released on Monday that while strides have been made in climate-related disclosures, global vulnerabilities persist due to inconsistent data, regulatory fragmentation and insurance protection shortfalls.

Four years after FSB, the international body that monitors and makes recommendations about the global financial system, published a roadmap to address climate-related financial risks, a lot remains to be done.

FSB said that foundational work had laid important groundwork, but “identification and management of such risks… remains work in progress,” particularly in developing economies and the insurance sector.

Widespread Uptake, Limited Completeness

The FSB welcomed the global uptake of the International Sustainability Standards Board standards, with jurisdictions representing 57 percent of global GDP having taken steps toward adoption by late 2024. Seventeen FSB jurisdictions have embedded ISSB structures or begun to do so.

However, the report cautioned that only 3 percent of companies analyzed reported on all 11 disclosure elements recommended by the now-disbanded Task Force on Climate-related Financial Disclosures.

More than 1,000 companies referenced the ISSB in their 2023–2024 reports, but widespread gaps remain in governance, strategy and risk management disclosures.

Efforts to streamline frameworks are ongoing. The IFRS Foundation has collaborated with the European Financial Reporting Advisory Group and the Global Reporting Initiative to reduce reporting burdens. New guidance and interoperability tools were published in 2024 and 2025.

Advances in Dashboards, EMDE Gaps Endure

The FSB noted significant activity in improving forward-looking, consistent climate data. The IMF’s Climate Change Indicators Dashboard and the World Bank’s Climate Change Knowledge Portal are key tools for macroeconomic risk assessment.

Meanwhile, the Net Zero Data Public Utility has made firm-level emissions data openly available.

Still, forward-looking metrics remain constrained by inconsistent definitions, modeling assumptions, and limited access to granular data — especially in emerging markets and developing economies.

The FSB’s own 2025 analytical toolkit proposed three categories of metrics — proxies, exposure, and risk — but flagged major challenges in cross-jurisdiction comparability.

Insurance Gaps Under Scrutiny

The report further indicated that scenario-based analyses are gaining traction, with the IMF now integrating climate risk into at least four of its annual Financial Sector Assessment Programs.

The Network for Greening the Financial System also released short-term “extreme but plausible” climate scenarios this year, the report stated.

Of particular concern is the growing protection gap in natural catastrophe, or NatCat, insurance. A joint IAIS and World Bank initiative is preparing a report on the closing NatCat insurance gaps in the Group of 20 nations.

The FSB warned that as insurance availability contracts, financial risk could shift to households, firms or governments — heightening systemic vulnerabilities.

Regulatory Tools

The report highlighted a proliferation of supervisory guidelines since 2022, including frameworks from the Basel Committee on Banking Supervision, International Association of Insurance Supervisors and International Organization of Securities Commissions.

Yet implementation lags. Many jurisdictions have introduced supervisory data collection, but few have operationalized system-wide responses. Data inconsistency and lack of granularity continue to hamper supervisory assessments.

To address these gaps, the IAIS released a detailed Application Paper in April 2025, while IOSCO focused on combatting greenwashing and enhancing oversight of voluntary carbon markets.

Medium-Term Outlook

Under a mandate from the South African G20 Presidency, the FSB outlined a more flexible and targeted medium-term approach. Rather than pre-committing to specific initiatives, the board said it would determine new work annually, based on member consensus and relevance to financial stability.

While no new major regulatory projects are planned, the FSB will continue to coordinate international efforts, share information, and facilitate voluntary peer reviews—starting with China’s climate risk framework this year.

A workshop on climate-related financial risks is also planned as part of the 2025 work program.

The FSB further emphasized that “much of the work… has been foundational in nature,” but called for continued progress in disclosures, data, and scenario analysis.

Addressing insurance protection gaps and improving the credibility of transition plans will be central to its evolving efforts.

“The four blocks of the Roadmap have proved sufficiently flexible,” the FSB said. “Going forward… physical risks and gaps in insurance coverage may contribute to a better understanding of financial stability risks.”