OeNB examines banks’ exposure to risks from the transition to a climate-neutral economy
Vienna (OTS) – In addition to global warming and the associated increasing frequency of extreme weather events, climate change also causes financial and economic risks. Some of these risks are not triggered directly by climate change, but rather result from the relevant reactions by politicians, companies or consumers. The so-called transition, i.e. the changeover to a climate-neutral economy, can lead to a drastic change in the prices of certain energy sources or other goods and thus also the income of their producers. If these companies have taken out loans that they can no longer service due to the transition, the risks to the banking sector also increase.
Central banks and regulators have therefore begun to examine these types of financial risks more closely. The Oesterreichische Nationalbank (OeNB) published an analysis in its current financial stability report in which the extent of the Austrian banks’ exposure to these risks was calculated for the first time. A method developed by Professors Stefano Battiston (University of Zurich) and Irene Monasterolo (WU Vienna) was used to identify economic activities that may be negatively affected by a transition. These Climate Policy Relevant Sectors (CPRS) are divided into six categories – “fossil fuels”, “energy suppliers”, “energy-intensive production”, “buildings”, “transport” and “agriculture”. Other non-climate-related activities, such as administration, education, finance and health care, are grouped together in the “Other” category. Subsequently, the banks’ claims against companies from the respective sectors were aggregated.
The investigation showed that the banks’ exposure to companies in the “fossil fuels” category was relatively low in 2019 (EUR 8 billion or 0.92 percent of the total exposure of Austrian banks) and to energy suppliers (EUR 14 billion or 1 , 62 percent). The exposure to energy-intensive sectors, e.g. B. the production of chemicals or electronics, and the transport sector is about the same (30 billion EUR or 3.45 percent). The majority of the exposure results from real estate loans, as the transition to higher energy standards for buildings and thus to increased investment or depreciation requirements in this traditionally large segment can lead to (EUR 142 billion or 16.40 percent). The exposure to agriculture is lowest among these categories (EUR 3 billion or 0.35 percent).
The exposure in the banking sector was relatively evenly distributed at the end of 2019 (cut-off date for the analysis). However, the analysis shows that larger banks have a higher exposure to fossil fuels and energy-intensive sectors than small or medium-sized banks and that a few, non-systemically relevant specialist institutions have a higher exposure concentration. In summary, it can be said that 26 percent (or EUR 228 billion) of the assets of Austrian banks are exposed to the risk of climate change through sectors relevant to climate policy. Compared with available studies in other countries, it shows that the risk distribution across the six categories is fundamentally very similar. However, Austrian banks are less exposed, especially in the field of fossil fuels. In general, it must be pointed out that due to the limited availability of data, detailed analyzes of the bank portfolios are not possible; nevertheless, the analysis gives an initial indication of the exposure of the Austrian banking sector.
“The risks of climate change and the resulting reactions from economic policy must be adequately measured, assessed and controlled by the credit institutions,” emphasizes Vice-Governor Gottfried Haber. Governor Robert Holzmann emphasizes the great social and economic importance of the discussion of the topic of climate change: “The central banks and supervisors are also aware of the economic challenges of climate change. They will therefore also deal comprehensively with the possible effects of climate change on monetary policy in the discussion of the Eurosystem’s monetary policy strategy. ”Some central banks and banking supervisory authorities have also announced that they will also map the effects of climate change on the banking sector in climate stress tests in the coming years in order to come to an assessment here at an early stage. The OeNB has already started work on a climate stress test – results are expected by the end of 2021. The European Central Bank (ECB) will analyze the resilience of banks in the euro area to the risks of climate change for the first time in 2022.
Inquiries & contact:
National Bank of Austria
Dr. Christian Gutlederer
Press officer
(+43-1) 404 20-6900
christian.gutlederer@oenb.at
www.oenb.at
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