ESG in the banking sector – ECB good practices and deadlines for the integration of ESG risks

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On 2 November 2022, the European Central Bank (“ECB”) published its thematic review and good practices for climate-related and environmental risks.

The two documents relating to how banks are dealing with climate and environmental risks:

Both documents should be read in conjunction with the ECB Guide on climate-related and environmental risks published in November 2020 (“ECB Guide”).


Scope and aim

The 2022 Thematic Review covered 107 significant banks under the direct supervision of the ECB and 79 less significant banks supervised by their national authorities.

It aims to foster the alignment of the banking sector with the supervisory expectations set out in the ECB Guide, by verifying whether banks adequately identify and manage climate risks and environmental risks such as biodiversity loss, and analysing banks’ risk strategies and their governance and risk management processes.

The 2022 Thematic Review was conducted in tandem with the ECB’s first supervisory stress test on climate-related risks, within which banks’ stress testing frameworks were assessed.


Key findings

The key findings of the 2022 Thematic Review include the following:

The ECB concludes that, despite improvements, banks are still far from adequately identifying and managing climate and environmental risks.

However, the ECB also notes that the good practices observed in numerous institutions demonstrate how the sector can harness innovation to address the prevailing challenges and that good practices are being deployed in relation to broader environmental risks, with institutions leveraging existing climate-related risk approaches.

The 2022 Good Practices is seen as a key supervisory publication in this respect, as it shares observations and good practices and illustrates the different ways that significant institutions can align their practices with the supervisory expectations set out in the ECB Guide.

The 2022 Good Practices should be read in conjunction with the ECB’s report on good practices observed in the climate-related stress test, which is to be published later this year. While the report on climate-related stress testing will focus primarily on stress testing and risk modelling, the 2022 Good Practices covers observed practices related to strategy-setting, governance and risk appetite, as well as risk management.


Key deadlines

As a result of the findings of the 2022 Thematic Review, the ECB is setting institution-specific staggered deadlines for banks to progressively meet the supervisory expectations laid down in the ECB Guide:

The ECB makes clear that these deadlines will be closely monitored and, if necessary, enforcement action will be taken.


Stay one step ahead of the ESG game and do not hesitate to contact our experts to help you meet the challenges deriving from the constantly evolving ESG framework.

Read the 2022 Thematic Review here_

Read the 2022 Good Practices here_

Read the ECB Guide here_

Access our timeline on key ESG milestones in the banking and insurance sectors here_

Download the press release

Luxembourg Newsflash – ESG in the banking sector – ECB good practices and deadlines for the integration of ESG risks

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