Kerstin Jochnick of ECB Outlines Planned Work to Address Climate Risks

Ms. Jochnick highlighted that, so far, banks have engaged with climate topics mostly by drawing up sustainability strategies that outline how they can reduce their impact on climate change and by pursuing other sustainability objectives. In future, though, banks will also need to adopt a more traditional risk management approach to understand how they are financially exposed to and affected by climate and environmental risks. Speaking about the actions being taken with respect to addressing the climate risks, she added that the ECB Banking Supervision is working through several international fora to define how climate-related risks should be integrated in both its own supervisory activities and in the risk management policies of banks. ECB will consult the public and the industry on this topic in the first half of this year. Later in the year, ECB intends to publish a guide setting out its supervisory expectations on the management and disclosure of climate-related risks. In addition to the work in the supervisory space, clarity is needed on the rules determining what constitutes a green investment. The taxonomy agreed by the European Parliament and the EU Council at the end of 2019 was a key step in this direction, enabling investors to identify environmentally sustainable economic activities that substantially contribute to climate change mitigation. By the end of December 2021, EC plans to define criteria for assessing whether an activity has a significant negative impact on sustainability.

Related Link: Speech

Keywords: Europe, EU, Banking, ESG, Climate Change Risk, Sustainable Finance, Taxonomy, ECB