Elderson rebukes banks over climate disclosures

March 17, 2022|Written by David Clarke|European Central Bank

European Central Bank (ECB) executive board member Frank Elderson has strongly rebuked eurozone banks over their failure to publish meaningful climate and environmental disclosures.

He was speaking as the ECB published data revealing that none of the 115 banks under its direct supervision currently meets its expectations for disclosures, and only 15% have published data on the emissions of the companies they finance.

Elderson said that banks are trying to compensate for the poor quality of their disclosures by publishing significant volumes of information around green topics, but that this amounted to “a lot of white noise”. He stressed that banks are failing to address the critical issues of how exposed they are to climate and environmental risks, and what action they are taking to manage those exposures.

Eurozone banks will be required to publish more information about their management of climate risks from early next year when new rules from the European Banking Authority come into force. They will also soon be required to disclose details of their climate impacts, under the European Commission’s corporate sustainability reporting directive.

Elderson said that time is running out for banks to get ready for stricter disclosure regulations, and that the ECB was ready to use all of the tools at its disposal to ensure that banks’ climate and environmental disclosures are up to scratch.

Climate advocates see the ECB’s findings as a demonstration of the need for quicker action to beef up the regulation of climate risks. Julia Symon, a researcher at Finance Watch, said supervisors should stop “snoozing the alarm clock” on climate risk.

Writing on Twitter, she called for binding rules on climate risk management, including the introduction of a ‘one-for-one’ capital rule for financing new fossil fuel projects. This would mean that banks would have to finance new projects solely from their own funds.

Symon also called for industry-wide standards on banks’ climate transition plans, and for rules on directors’ remuneration to reflect climate risk management objectives. She added that these measures could all be included as part of the ongoing review of the EU’s banking rules.

Elderson highlighted that a number of banks had made climate commitments that they were failing to substantiate. The ECB found that 30% of the banks that have committed to aligning their exposures with the Paris Agreement have not not provided any information to back this up.

The ECB is gradually integrating climate and environmental risks into its regular supervisory methodology, alongside the launch of its first climate risk stress test earlier this year. It said its supervision of climate risk will ultimately impact banks’ Pillar 2 capital requirements.

This page was last updated March 17, 2022

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