Legal & Regulatory News

ECB speech on climate change-related risks for financial sector

27 February 2020

The European Central Bank (ECB) has published a speech by Christine Lagarde, ECB President, on climate change and the financial sector.

In this speech, Ms Lagarde noted that, in broad terms, the main climate change-related risks for the financial sector fall into three categories, namely risks stemming from disregard, delay and deficiency. She further noted that it was vital for financial institutions to understand the climate-related risks on their balance sheets. Greater disclosure by companies on their climate exposures would also be essential in order to bolster the ability of market participants and financial institutions to carry out appropriate risk assessment.

ECB Banking Supervision is currently assessing banks' approaches to climate risks and developing supervisory expectations on those risks. Preparatory work is underway for a macroprudential stress test to assess climate-related risks, with the first results expected by the end of 2020. The stress test framework aims to assess how climate-related risks disseminate through the real economy and the financial system.


Click here to access the speech.