De Nederlandsche Bank (DNB) published its first climate-related financial disclosures, showing the bank’s balance sheet is sensitive to transition risks.
DNB also revealed that a relatively small portion of its total portfolio is responsible for the sensitivity, primarily due to its exposure to energy companies in the European Central Bank’s (ECB) corporate bond programme.
The exercise included four climate stress test scenarios covering energy transition risks, and based on possible public policy and technological developments. The ‘double-shock’ scenario – with simultaneous policy shocks and technology shocks – was found to be the highest risk, with a major impact on the corporate bond and equities portfolios in the bank’s own-funds investments. The climate stress tests also revealed a balance sheet sensitive to transition risks, largely because of the energy transition’s impact on market interest rates.
The DNB’s disclosure also outlines the bank’s involvement in the ECB’s ongoing monetary strategy review. The Dutch central bank is co-lead of the ECB work stream examining how monetary policy instruments can be deployed to promote the transition to a green economy. It is also involved in an ECB high-level task force developing investment principles for the sustainable investment of non-monetary reserves. The document also looks at the bank’s use of supervisory activities to influence the way Dutch financial institutions manage climate risks.
Presented as an annex to the DNB’s 2020 annual report, the disclosures are aligned with the recommendations of the Taskforce on Climate-Related Financial Disclosures, making the bank one of the first in the world to report in this way.
The DNB’s climate-related financial disclosure comes in the wake of an agreement among all Eurosystem central banks, including the ECB, to begin annual climate-related disclosures of their own-fund portfolios within the next two years.
This page was last updated April 23, 2021
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