On November 2020, European Central Bank (ECB) published a guide on climate-related and environmental risks outlining the ECB’s understanding of the safe and prudent management of climate-related and environmental risks under the current prudential framework. It describes how the ECB expects institutions to consider climate-related and environmental risks – as drivers of existing categories of risk – when formulating and implementing their business strategy and governance and risk management frameworks. It further explains how the ECB expects institutions to become more transparent by enhancing their climate-related and environmental disclosures.
Based on the guide, the ECB will follow up with banks in two concrete steps. In early 2021, it will ask banks to conduct a self-assessment in light of the supervisory expectations outlined in the guide and to draw up action plans on that basis. The ECB will then benchmark the banks’ self-assessments and plans, and challenge them in the supervisory dialogue. In 2022, it will conduct a full supervisory review of banks’ practices and take concrete follow-up measures where needed.
This guide is not binding for the institutions, but rather it serves as a basis for supervisory dialogue.