No European Bank Meets The ECB’s Expectations On Climate Risk Reporting

Climate changes risksAll countries are likely to see higher temperatures by the end of the century, but global warming will be more severe in some regions of the world

Fernando Rodríguez | “Although there have been improvements since the first assessment at the end of 2020, no bank fully meets supervisory expectations” on environmental and climate risk reporting, according to the latest report of the European Central Bank (ECB) with data analyzed as of November 2021 on 109 entities under direct supervision.

Although more than 70% of banks provide information on how their boards of directors monitor these risks – compared to 50% a year earlier – the ECB considers that “the overall level of transparency is still insufficient”.

In other areas, about 75% of the entities do not report on the material impact of these risks on their overall risk profile, “although about half of them have indicated to the ECB that they see themselves as exposed to these risks,” says the European banking supervisor. In addition, 60% also fail to describe how these risks will affect their strategy and “only around 50% publish key performance indicators” in this area.

Finally, 30% of European banks that publicly committed to align themselves with the Paris Agreement objectives “do not provide any information to support” this commitment.

The ECB has placed the supervision of climate and environmental risks among its priorities for the period 2022-2024, which includes the first stress test on this subject for supervised entities for this year, among other supervisory activities.

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