ECB relies on Asset Impact data and PACTA to assess climate-related and environmental risks in banks.
In late 2022, the European Central Bank (ECB) published the results of its thematic review, focused on the management of climate and environmental risks in banks. To study the 186 banks included in the review, which have total combined assets worth EUR 25 trillion, the ECB used Asset Impact data and the scenario analysis tool, PACTA, to identify banks' exposure to elevated climate transition risks. The ECB compared the banks' largest clients' forward-looking production plans with a net-zero-by-2050 pathway. These scenario analysis results informed the ECB's conclusion that banks have not progressed adequately in managing climate and environmental risks.
Although there were improvements compared to the previous year, the ECB has set deadlines for banks to meet supervisory expectations by the end of 2024. While 84% of banks had practices in place at the time the review took place, they required more refined methods and information on climate and environmental dangers, causing blind spots in identifying them. The report highlights the various steps the banks will have to take in order to meet the established deadlines, as well as the importance of asset-based forward-looking data, such as Asset Impact, to identify exposure to climate-related risks.
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Read the report here: ECB's Walking the Talk
Read the press release: ECB's press release