Among other things, supervisors want to ensure that investors are transparently and reliably informed about the sustainability record.
(Photo: dpa)
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London The EU banking supervisors have called on the financial institutions in the international community to draw up ten-year plans for dealing with climate risks. The financial institutions should explain how they intend to cope with dangers to their business in connection with the issues of the environment, social affairs and corporate governance – in specialist circles “ESG” for short – as the EU banking authority EBA announced on Wednesday.
In their report, the supervisors made recommendations to banks and investment firms on how they should consider such ESG risks in their business strategies and risk management, among other things.
For investors in the financial market, ESG criteria for sustainable investing are becoming increasingly important. In the meantime, for example, more and more investor money is flowing into climate-friendly projects and companies. Among other things, the supervisors want to ensure that investors are transparently and reliably informed about a company’s climate and sustainability record.
According to the EBA, banks should plan strategically over a period of at least ten years. They should present their resilience in different scenarios, state their goals in the areas of environment, social affairs and corporate governance (ESG) and sound out the need to bring sustainable products to the market. So far, banks typically plan strategically for a period of up to five years.
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Climate risks for financial institutions can, for example, be risks to their loan commitments that result specifically from climate change. Such physical hazards include extreme weather conditions, storms, floods, or heat wave hazards such as lack of water. In addition, there are the risks associated with the institutes’ new laws and regulations and technological change in connection with climate change.
More: We need more speed in climate protection, says Andreas Pinkwart
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