When I want to know about banking and finance I come to Refi Review - Reader
January 25, 2024

ECB report: 90% of European banks at risk from climate change.

A study by the ECB has found that 90% of European banks’ loan portfolios are not aligned with global climate goals and the EU’s 2050 climate neutrality target. The study assessed the credit portfolios of 95 banks and focused on six carbon-intensive sectors. It revealed that only 8 out of 95 banks had lending practices in line with the 2050 net-zero pathway, exposing a significant transition risk for the majority. The report highlighted the prevalence of reputational and litigation risks, with 70% of banks affected. Despite 72 banks committing to net-zero, 93% are yet to align their strategies and internal processes. The report emphasized the need to align financing practices with decarbonization to avoid exacerbating climate-related risks. The study also warned of the risks of misalignment, with 14% of banks having large exposures that could escalate rapidly if credit lines are fully utilized. The report urged banks to identify and measure the risks arising from the transition to a decarbonized economy.