Monday, November 29, 2021

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    Eurozone banks told to do more to tackle climate change risks

    The European Central Bank urged banks to “urgently” improve their plans to protect their businesses from climate change risks after reviews revealed that lenders’ approaches to environmental problems have widespread shortcomings. ..

    The ECB, which has directly overseen the largest banks in the euro area for seven years, Initial evaluation of bank preparation To address increasing climate and environmental risks. Banks under scrutiny have found that nothing is close to the ECB’s expectations. The central bank said climate risk assessments were integrated with regular work on setting capital levels for individual banks, so lenders could “eventually” face higher capital demand.

    The biggest risks for banks, according to the assessment, come from more sustainable activities and exposure to energy companies that are not shifting their focus to energy-intensive sectors such as aviation. Other risks include lending to buildings that are energy inefficient and therefore may have low resale value.

    Introduced by banks such as HSBC and Bank of America Unique Net Zero Target, Sector scrutiny in recent years is increasing Lending to carbon-intensive activities..

    The ECB’s survey focuses on 112 banks with total assets of € 24 trillion. Half of those lenders said climate change would have a “significant” impact on their business over the next three to five years. None of the banks that reported climate risk as “insignificant” did not perform sufficient analysis. I have written Frank Elderson, a member of the ECB’s board of directors and vice chairman of the ECB’s Board of Corporate Auditors, said: In a blog post.

    Other shortcomings highlighted by the ECB are the lack of stress testing to see what happens to banks’ businesses in different climate change scenarios, and the more resilient business models in the face of climate change. It contained an inadequate plan on how to make it. Banks with the biggest drawbacks are being asked to fix them as part of the ECB’s regular oversight.

    “Banks need to urgently set ambitious and specific goals and timelines (including measurable intermediate milestones) to mitigate their exposure to current and future climate and environmental risks.” Elderson writes.

    Sasja Beslik, Sustainability Head of Denmark’s Largest Pension Fund PFA and a Renowned Investor in Environment, Society and Governance, said banks “significantly” a climate risk management strategy before they suffer financial losses. I didn’t expect it to improve. ” [from lending to unsustainable industries]”.

    “Banks reflect the real economy. The real economy is not sustainable, so the way banks operate is not sustainable,” he added.

    Climate capital

    Where climate change meets business, markets and politics. Check FT coverage here..

    Interested in FT’s commitment to environmental sustainability? Learn more about science-based goals

    The ECB has found some bright spots. Elderson said that two-thirds of banks will make a lending decision on climate risk by giving additional due diligence to the borrower’s climate risk or by phased out lending to the most exposed industries. He said he made “meaningful progress” in weaving.

    The ECB will publish a report on bank climate risk disclosures in the first quarter of 2022 and plans a broader review of banks’ strategies, governance and risk management on climate change risk early next year. Reviews only publish the results of the financial system, not individual lenders.

    In the UK, banks submitted data from the Bank of England’s first climate “stress test” last month. This explains that the BoE is “essentially exploratory” regardless of capital requirements. The results presented as aggregated results for the UK banking system will be published by May.

    Eurozone banks told to do more to tackle climate change risks Source link Eurozone banks told to do more to tackle climate change risks

    The post Eurozone banks told to do more to tackle climate change risks appeared first on California News Times.

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