The EBA Launches Its Monitoring Of Climate Risk In The EU/EEA Banking Sector

The European Banking Authority (EBA) today published key indicators on climate risk in the EU banking sector, based on information published by banks as part of their Pillar 3 ESG disclosures. This new dashboard is a first step in establishing a broader ESG risks monitoring framework and allows centralised access to comparable climate risk indicators. It also provides relevant benchmarks and enhances the assessment and monitoring of transition and physical climate-related risk across the EU/EEA banking sector.

The EBA has a traditional role in gathering data and analysing risks to facilitate the stability and effectiveness of the EU banking sector. The monitoring of ESG risks is a new initiative. This new interactive monitoring tool covers, for the time being, climate risk only, thus reflecting the scope of the quantitative Pillar 3 disclosures.

The data shows substantial EU/EEA banking sector exposure to sectors highly contributing to climate change, with average exposure shares to these sectors above 70% in most countries. Banks reported the share of exposures in areas subject to elevated physical risk below 30% on average, but the level of granularity of assessment differs across banks. The data further indicates a notable portion of loans secured by immovable property falling within the highest energy efficiency score buckets, although banks make considerable use of proxies and estimates.

The indicators are built based on data with reference dates of 31 December 2023 and 30 June 2024. The EBA intends to regularly update the indicators and to further develop the monitoring framework over time.

Legal basis

The ESG risk indicators have been developed in accordance with Article 29(f) of the EBA founding regulation (Regulation EU 1093/201), requiring the EBA to put in place a monitoring system to assess environmental, social and governance-related risks taking into account the Paris Agreement to the United Nations Framework Convention on Climate Change.

Moreover, the development of the ESG risk monitoring framework supports the Commission’s objective to systemically monitor climate-related financial stability risks.