Legal & Regulatory News

European Central Bank releases publication on climate-related risks to financial stability

On 23 May 2022, the European Central Bank released a publication covering the relevance of climate-related risks to financial stability as part of its May 2022 Financial Stability Report.

The publication provides an overarching analysis of the current role of green finance in supporting the transition to a low-carbon economy before noting the limited change in financial system exposures to transition risk. Furthermore, the financial stability risks resulting from physical hazards are investigated – noting that investors holding assets that are susceptible to these risks are vulnerable.

The publication concludes emphasising that further progress on climate data is required, but highlights that there is encouraging evidence of greater disclosure by non-financial corporations. Greenwashing is a threat to the transition to a net zero economy and remains a concern in markets. The publication is hoped to contribute to the policy debate around disclosure standards for sustainable financial instruments and climate-related prudential policies.

Click here to view the publication.