Lagging behind climate change – ECB draws sobering conclusion from institutions‘ self-assessments on climate and environmental risks

In August 2021, the ECB published the first results of its evaluation of bank climate and environmental risk self-assessments in the Supervision Newsletter. Now, the full data collection report on the supervisory review of banks’ approaches to manage climate and environmental risks has been released, with some startling new developments.

In November 2020, the ECB published its guidance on climate and environmental risks, setting out 13 supervisory expectations for banks. Subsequently, the ECB requested banks to conduct a self-assessment regarding their current level of compliance with the 13 expectations. Furthermore, the ECB required institutions to develop action plans to fully implement these expectations.

The ECB states that the banks have not yet sufficiently addressed climate and environmental risks, nor have they identified the areas for action in sufficient detail. Thus, in the ECB’s view, only about 1/3 of the banks have taken a sufficiently granular look at the relevant issues, while the majority of institutions have so far taken only insufficient analyses and steps to meet the requirements.
Overall, the ECB is not satisfied with the current state of play, stating that banks are too slow in adapting their current practices for climate and environmental risk management and disclosure and will not meet the ECB’s expectations at this pace in the foreseeable future.

More about the results and details of the large-scale assessment of how European banks are adjusting their practices to manage climate and environmental risks, in line with the expectations set out in the November 2020 ECB Guide at PwCPlus

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