ECB sees climate risk practices improving, but patchy coverage remains
European banks have made “significant strides” in managing climate and nature-related risks, according to Frank Elderson, Vice-Chair of the European Central Bank (ECB) Supervisory Board. In a recent update, Elderson shared that over half of EU banks now have leading environmental risk management practices in place for some exposures, a dramatic rise from just 3% in 2022.
This progress follows the ECB’s climate stress testing and supervisory priorities set in 2022, which urged banks to integrate climate risk into their frameworks. By the end of 2024, 100% of banks included climate risk in stress testing, up from 41% in 2022. Materiality assessments have also become more robust, with over 90% of banks recognising material exposure to climate-related risks.
However, the ECB notes that many banks still apply these practices selectively.
With more banks taking climate risk analysis seriously, structured data is more important than ever. Digital frameworks and taxonomies will be key to ensuring these risks are disclosed consistently, comprehensively, and comparably.
Read the full update here.
