(Finance) – Although European banks have made progress in the disclosure of climatic and environmental risks, the European Central Bank (ECB) says that no bank fully meets supervisory expectations. Frankfurt, which today released an updated progress assessment from November 2020, however acknowledges that more banks now disclose meaningful information on climate and environmental risks. For example, over 70% of rated banks, up from just over 50% in 2020, now explain how their board oversees such risks.
“However, the general level of transparency is still insufficient“, emphasizes the ECB supervisor. About 75% of banks do not disclose whether climate and environmental risks have a material impact on their risk profile, although about half of the banks that do not have told the ECB that they consider themselves exposed to and nearly 60% of the banks in the sample do not describe how transition risk or physical risk could affect their strategy.
Banks’ disclosure of key metrics is also not sufficiently in line with supervisory expectations, with only around 50% publishing key performance or risk indicators on climatic and environmental risks. Furthermore, only 15% declare financed emissions of Scope 3which cover issues occurring along the entire value chain of business activities, including those of counterparties linked to credit portfolios.
In addition, many banks they do not sufficiently motivate their disclosures on climatic and environmental risks. For example, nearly 30% of banks that have committed to align their exposures to the Paris Agreement do not provide any information to support this. As an increasing number of banks commit to taking net-zero initiatives, users of bank information will increasingly seek more detailed information on banks’ progress and the risks that arise from mismatch.