Wednesday, February 8, 2023

The ECB will analyze the risks of climate change for the financial sector with new indicators

The European Central Bank (ECB) has announced that it will now use a series of environmental statistical indicators to monitor climate risks in the financial sector and to promote a sustainable banking system.

These new indicators will be experimental or analytical. The experimental ones will meet many but not all of the ECB’s qualitative statistical criteria, the entity itself admits.

These parameters will seek to categorize debt instruments based on whether they are “green”, “social”, “sustainable” or “related to sustainability”.

On the other hand, the analytical indicators will be of lower quality and will have certain limitations. These will analyze the carbon emissions attributable to financial institutions, on the one hand, and, on the other, they will also study the physical risks that climate change represents, such as in the case of floods, droughts or fires.

The ECB has stated that these indicators are still being refined and should be used with some caution, but has indicated that it will work to improve the methodology and data used.

“We need to better understand how climate change will affect the financial sector, and vice versa. For this, obtaining reliable information is crucial”, explained the member of the Executive Committee of the ECB, Isabel Schnabel.

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