Climate & Capital Media’s Post

Financial institutions continue to finance climate-damaging activities, yet emissions associated with their lending, investments, and underwriting—collectively known as financed emissions—are often missing or underreported in sustainability disclosures. This lack of transparency hinders the ability of prudential supervisors to evaluate progress towards decarbonization or improved climate risk management, undermining efforts to address systemic climate-related financial risks. Read Ingrid W.'s thoughts on how the new reporting requirements from the International Sustainability Standards Board (ISSB) will provide investors with more transparency.  https://lnkd.in/eyUr6d-g Climate & Capital Media Green Central Banking S&P Global, Deutsche Bank,  ING, ING Group International Banking Federation (IBFed), Deloitte Deloitte Digital European Central Bank, U.S. Securities and Exchange Commission City University of Hong Kong, #climatechange #climatechangenews #climatechangeinvestment #climate #climatenews #climateeconomy #climatebanking #climateinvesting #climatereporting #climatedata #climatereport #esg #esgdata #jobs #linkedin #linkedinnews #linkedinjobs #esgreporting #esgfinance #esgeconomy #esgdata #esgnews #esgreport #esgbanking #banking #investing #economy #investors #bank #greenbanking #greeneconomy #greenfuture #greennews #greeninvesting #cleaninvesting #data # 

A new ECB report shows where attention is needed by Euro area banks to manage climate risk and decarbonize their lending portfolios. The risks stemming from the transition towards a decarbonised economy can have a significant effect on the credit portfolio of a financial institution. If the transition towards a decarbonised economy becomes disorderly, there will be a growing need to quantify the transition risks in banks’ credit portfolios. The euro area banking sector shows substantial misalignment and may therefore be subject to increased transition risks, and around 70% of banks are also subject to elevated reputational and litigation risk. Also interesting in this context is the ESG Benchmark Research 2023 in which Dutch Banks and insurers are benchmarked on their ESG performance with their European Peers. Overall the Dutch Financial sector is frontrunner in major areas, but there are also areas of improvement, vitst: https://lnkd.in/eyZ_pxJ2 to find out more.

𝗘𝘂𝗿𝗼𝗽𝗲𝗮𝗻 𝗕𝗮𝗻𝗸𝘀 𝗙𝗮𝗰𝗲 𝗖𝗹𝗶𝗺𝗮𝘁𝗲 𝗧𝗿𝗮𝗻𝘀𝗶𝘁𝗶𝗼𝗻 𝗥𝗶𝘀𝗸 - 𝗘𝗖𝗕 𝗦𝘁𝘂𝗱𝘆 𝗜𝗻𝘀𝗶𝗴𝗵𝘁𝘀 🌍 A recent European Central Bank (ECB) study reveals a concerning climate transition risk among European banks. The study, assessing 95 banks covering 75% of euro area loans, found 90% of these banks have loan books not aligned with global climate goals and the EU’s 2050 climate net-zero target. 🏦 𝗞𝗲𝘆 𝗙𝗶𝗻𝗱𝗶𝗻𝗴𝘀 ● Most banks need to finance companies faster in phasing out (transitioning away) high-carbon production capacities. ● Increased litigation and reputational risks are prominent, affecting around 70% of banks. ● Despite net zero commitments by 72 banks, 93% still need to be on track to meet these goals. ● Credit risks were identified, with some banks having significant exposures greater than €5 billion. 💼 𝗦𝗲𝗰𝘁𝗼𝗿 𝗠𝗶𝘀𝗮𝗹𝗶𝗴𝗻𝗺𝗲𝗻𝘁 ● Banks show larger misalignments in sectors with earlier transition pathways. ● Sectors like steel and cement, lacking viable zero-emission alternatives, show smaller misalignments. ● Automotive sector financing needs to be revised due to the delayed transition to electric vehicles. 🌱 𝗜𝗺𝗽𝗮𝗰𝘁 𝗼𝗻 𝗕𝗮𝗻𝗸𝗶𝗻𝗴 𝗦𝗲𝗰𝘁𝗼𝗿 ● Banks risk solvency issues due to high exposure to misaligned companies. ● The average exposure size to misaligned companies is more than double compared to aligned ones. ● Over 30% of misalignment stems from inadequate financing for renewable energy sources. 🔍 𝗘𝗖𝗕’𝘀 𝗧𝗮𝗸𝗲 ● Frank Elderson from ECB highlights the growing climate litigation, emphasising the need for banks to adapt to a decarbonized economy. 📉 𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻 The report underscores the urgent need for banks to reassess and align their lending practices with climate goals, highlighting potential financial risks and the importance of supporting the transition to a greener economy. #Banking #ClimateChange #ECB #Sustainability #Finance #NetZero #RenewableEnergy #RiskManagement #GreenFinance #EuropeanBanking https://lnkd.in/euesbnaK Irina Velkova John Mongelard Raluca Stefan Nousheen Hassan Rashim Arora, FRM, SCR Anne Wilkinson Aboobaker Jussab Kavita Jangid Shawn Chan Tina Bhardwaj Laura Baldock Olamide Lande Adesanya Jodie Hilton

📢 Standardisation Snag? TPI Centre recognises BCBS Climate Risk disclosure push but warns of comparability challenges and highlights need to move from partial to complete disclosures. The Basel Committee on Banking Supervision (BCBS) issued a public consultation on its proposed Pillar 3 disclosure framework for climate-related financial risks. The TPI Centre recognises the efforts of the BCBS to steer disclosure requirements for banks towards a positive direction. Bank transparency is key to effective climate risk management and coordination between different stakeholders in the financial system. Overall, the proposed disclosures support this goal. Considering the challenges and opportunities identified by the TPI Centre’s Net Zero Banking Assessment Framework (NZBAF), key feedback includes: 👉 1️⃣ All elements of the consultation should be mandatory to ensure comparability and to enable constructive engagement with banks on the implementation of their climate-change commitments. 👉 2️⃣ Qualitative disclosures should include banks' approach to financing the fossil fuel sector including details of the banks financing policies in the sector (if present). 👉 3️⃣ Quantitative disclosures should also be reflected in banks’ financial statements. 👉 4️⃣ The BCBS should provide a set of physical outputs relevant to the setting of sectoral emission reduction targets. Find the full response to the consultation here: https://lnkd.in/dc_SrA64 For any questions or feedback, please contact gri.banking@lse.ac.uk

Buckle up for a seismic shift in the financial landscape for carbon-intensive sectors in Europe. European Banking Authority introduces groundbreaking Pillar 1 requirements for banks, urging them to integrate environmental and social risks into client risk evaluations. This pivotal move signifies the first instance of firm capital obligations reflecting such risks. While certain mandates take immediate effect, others will be phased in, potentially leading to novel legislation. These changes, as the EBA suggests, will reshape traditional financial risks like credit and market risks, especially for carbon-intensive sectors like oil, gas, and mining. Yet, the European Banking Federation (EBF) voices concerns. They argue for the implementation of Pillar 2 rules, tailored to each bank, citing insufficient data for universal ESG adjustments. Denisa Avermaete of the EBF emphasizes the importance of global uniformity for future Pillar 1 modifications, ensuring fairness for EU banks. 📌My analysis: EBA's introduction of the Pillar 1 requirements represents a seismic shift in the financial landscape for carbon-intensive sectors in Europe, notably oil, gas, and mining. By compelling banks to incorporate environmental and social risks into their client risk assessments, projects in these sectors could face heightened scrutiny and potentially steeper financing costs. The tangible capital obligations aligned with these risks might mean that projects with higher environmental impacts could be deemed riskier, leading to higher interest rates or even financing denials. As a result, oil, gas, and mining enterprises may find themselves in a position where they need to invest more in sustainable and environmentally friendly practices to ensure their projects are financially viable. While the EBF's concerns highlight the challenges in uniformly applying these rules, the overarching trend indicates a costlier future for traditional, carbon-intensive projects in Europe. Let’s see if this can accelerate the transition to alternative, cleaner energy sources and practices in the continent. #ESG #EnergyTransition https://lnkd.in/eXxd5tTm

📢 **ECB Publishes Second Series of Climate-related Financial Information** 🌍 The European Central Bank (ECB) published its second series of climate-related financial information on Tuesday, June 25. This report provides details on the carbon footprint of its portfolios, their exposure to climate risks, as well as governance, strategy, and climate risk management. ### 🔍 **Key Takeaways:** 1. **Decarbonisation of Eurosystem Portfolios:** - **Reduction of Financed Emissions:** The Eurosystem's tilt framework significantly contributed to reducing financed emissions associated with corporate assets in monetary policy portfolios in 2022 and 2023. - **Coverage of Information:** Disclosures now cover more than 99% of the Eurosystem's monetary policy holdings, improving transparency and supporting efforts to bridge climate data gaps. 2. **Interim Targets:** - **Monitoring Emissions Reductions:** The Governing Council agreed to set interim targets to monitor the trajectory of emissions reductions in corporate asset portfolios, supporting the goals of the Paris Agreement. 3. **Expanding the Scope of Disclosures:** - **Inclusion of Public Sector Assets:** Disclosures now include the Eurosystem's holdings in public sector assets and covered bonds under the APP and PEPP, as well as the ECB's foreign reserves. 4. **Non-Policy Portfolios:** - **ECB Staff Pension Fund:** All corporate sector investments in the ECB staff pension fund now follow the EU's Paris-aligned benchmark indices, reducing associated emissions by approximately 50% in 2023. - **ECB Own Funds Portfolio:** The share of green bonds increased from 13% in 2022 to 20% in 2023, with a target of reaching 25% in 2024. By providing climate-related information on central bank portfolios, the ECB and the Eurosystem aim to lead by example, improve transparency, and support regulators' and other stakeholders' efforts to bridge climate data and reporting gaps. 🌱 **For more information, read the full document:** [Eurosystem and ECB portfolios steadily decarbonising, climate-related disclosures show](https://lnkd.in/ebUGt3Wm) #ECB #Decarbonisation #Climate #SustainableFinance #ParisAgreement #Eurosystem #ClimateTransparency #GreenInvestments

European banks may soon have to measure how much of their carbon-intensive exposures align with the IEA's net zero pathways. This is according to draft guidelines on the management of ESG risks by the European Banking Authority (EBA) that were made public last Thursday. Seems like regulators are really getting serious about ESG risks in the financial sector... The guidelines fall under under the new EU banking package that was endorsed by the EU Council and Parliament at the end of last year. One consequence could be that banks with poorly aligned portfolios will be asked to set aside more capital to cover potential losses. The draft guidelines include a number of other recommendations on how banks should monitor and manage ESG risks (also non-climate risks) in the future. Link to the draft guidelines: https://lnkd.in/dVE_-_H9 #esg, #sustainablefinance

RFI provided detailed comment on two pivotal exposure drafts which we believe will improve the consistency, comparability and usefulness of the guidance for stakeholders of banks in #OIC markets, including #IslamicBanks. The first comment letter addressed the Transition Plan Taskforce (TPT) “Banks Sector Guidance” which is strategically aligned with the International Sustainability Standards Board (#ISSB) standards (IFRS Foundation S1 and S2) and draws upon guidance developed by the Glasgow Financial Alliance for Net Zero (GFANZ). The second comment letter was on a General Council for Islamic Banks and Financial Institutions (CIBAFI) exposure draft on the “Development of a Greenhouse Gas Measurement Tool to Reinforce the Role of Islamic Financial Institutions in Supporting Climate Action” based on the standard developed by Partnership for Carbon Accounting Financials (PCAF). RFI’s comments aim to support and encourage development based on global baselines for #ResponsibleFinance disclosure to account for implementation challenges faced by #IslamicBanks and other banks in #OIC markets Read our announcement, which includes links to our comments and the relevant material: https://lnkd.in/g3dztGsm

🌍 Eurosystem and ECB Portfolios Steadily Decarbonising: Key Data from Climate-Related Disclosures 📅 25 June 2024 The ECB's latest climate-related financial disclosures reveal significant strides in reducing the carbon footprint of Eurosystem portfolios. Here are the key data points: Emissions Reduction: Emissions from Eurosystem corporate sector portfolios continued to decline, with one-fifth of the reduction in 2022 and 2023 due to the Eurosystem's reinvestment strategy favoring climate-efficient issuers. Expanded Disclosures: Coverage now includes over 99% of Eurosystem monetary policy holdings, significantly improving transparency. Interim Targets: New emission reduction targets for the corporate sector portfolios under the APP and PEPP to align with the Paris Agreement goals. Broader Scope: Disclosures now also include public sector assets, covered bonds, and ECB’s foreign reserves, representing 99.7% of assets held for monetary policy purposes. Non-Monetary Policy Portfolios: ECB staff pension fund investments cut emissions by 50% in 2023, with a 7% annual reduction target. Green bond investments increased from 13% in 2022 to 20% in 2023, aiming for 25% in 2024. By leading with transparency and action, the ECB and Eurosystem are committed to supporting a sustainable financial future. 🌱 #ClimateData #ECB #SustainableFinance #Decarbonisation #Transparency #GreenInvestment

If Europe is moving in this direction, one can expect Canadian and American regulators are looking at this too (or should be). With North American banks like RBC and Citi overexposed on risky fossil fuel clients and financing, a similar measure could have consequences here. Hoping Office of the Superintendent of Financial Institutions Canada , Finance Canada / Finances Canada , U.S. Securities and Exchange Commission and Chrystia Freeland will take some inspiration from this leadership. #climatefinance #banking