This is based on the publication by European Central Bank of its latest “thematic review” results” on how 186 banks address climate and environmental risks and comments from Frank Elderson, vice-chair of the ECB’s supervisory board.
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The ECB’s conclusions are clear from the assessment of the supervised banks: Climate risks need to be identified better.
96% of the 186 supervised banks do not meet the ECB’s expectations, and 60% have significant shortcomings.
It urges banks to integrate climate risk considerations into all their activities by the end of 2024 or face increased capital requirements and fines.
It is interesting to note that ECB states, “80% of banks reported being materially exposed to climate risks, up from 50% in 2021” and “almost all banks use at least basic quantification methods to measure climate risks, but only 25% have advanced methods.”
This means risk management capacities need to progress, and Green RWA will very soon make new propositions to tackle climate-related financial risks main constraints: data and modelisation.
Bank of England conference 2 weeks ago about Climate Risk and Capital ended with similar conclusions that the forward nature of this new risk, as well as its uncertainty and long horizon, made it very difficult to quantify.
Green RWA 