Steps in this direction will be taken once the technical standards relating to the ‘third pillar’ obligations concerning banks’ exposures to physical and transition risks, currently in the consultation phase, have been finalized. The inclusion of this information in the balance sheets is essential to enable all stakeholders (shareholders, creditors, consumers) to monitor and stimulate sound risk management on the part of financial intermediaries.
At the same time, supervisory authorities are working hard to encourage banks to make the appropriate organizational arrangements to measure, monitor and manage climate-related financial risks. Last year, a specific guide was issued within the Single Supervisory Mechanism to define supervisors’ expectations in this area.