As an active member of the Network for Greening the Financial System (NGFS), the European Banking Authority (EBA) is proud to announce the release of the NGFS Declaration on the Economic Cost of Climate Inaction on the occasion of the 2025 United Nations Climate Change Conference (COP30) in Belém, Brazil. The declaration underscores the mounting macroeconomic and financial risks of delayed climate action and reaffirms the NGFS’s commitment to supporting a well-managed transition to a low-carbon economy.
With this Declaration, the NGFS, a coalition of 146 central banks and financial supervisors and 23 observers from around the world:
- Highlights the rising economic costs of climate inaction, with material economic and financial risks that have implications for the core mandates of central banks and financial supervisors.
- Warns that delayed action could halve the effectiveness of transition efforts, with transition costs rising from 0.5% to 1.3% of global GDP by 2030 in the case of a three-year delay.
- Stresses that climate-related shocks could trigger global spillovers, by disrupting food systems, energy markets and supply chains, resulting in macro-financial instability and disproportionately impacting vulnerable economies.
- Calls for financial institutions to factor climate and nature-related risks into their strategies and operations, through scenario analysis, climate disclosure standards and transition planning.
The Declaration draws on recent NGFS deliverables, such as climate scenarios, which provide tools for central banks and financial supervisors to integrate climate and nature-related risks into their strategies. Through its work, the NGFS shows that addressing climate-related financial risks like any other financial risk benefits both the financial system and the planet.
As a member of the NGFS the EBA is committed to contributing to the greening of the financial system. In line with its Roadmap on sustainable finance, the EBA continues to integrate sustainability factors in the EU banking regulation consistently with its broader objective of contributing to the stability and orderly functioning of the financial system. The EBA supports banks’ identification, assessment and management of environment-related financial risk, including through scenario-based methods, as well as effective supervision, by providing guidelines for institutions and their supervisors. It contributes to improved data availability and transparency through specification of climate-related disclosures, and publication of the ESG risk dashboard based on the disclosed data. Finally, the EBA incorporates climate in the assessment of risks in the EU banking sector, including in its stress testing activities.
José Manuel Campa, the Chairperson of EBA said: “Financing sustainability and facilitating the needed change is a key opportunity for the EU banking sector. At the same time, we need to ensure that financial risks stemming from ESG factors are well-managed.”
François-Louis Michaud, the Executive Director of the EBA further emphasised the role of risk management stating: “Sound environmental risk management is needed as only a robust banking sector can effectively fund the transition towards a sustainable European economy”.
Background
The Network for Greening the Financial System (NGFS) was launched at the Paris One Planet Summit on 12 December 2017. It represents a group of central banks and supervisors, which are willing to share best practices and contribute to the development of environment and climate risk management in the financial sector, and to mobilise mainstream finance to support the transition toward a sustainable economy. The NGFS brings together 146 central banks and supervisors and 23 observers.
For more details, visit the NGFS website, LinkedIn account, and the EBA 2024 Annual Report.
