The European Central Bank (ECB) today announced a decision to expand its work on climate change and release a new ‘Climate and Nature Plan 2024-2025’, setting out its roadmap for action in these areas in the coming years. two years is set out.
According to the ECB, the new initiative comes amid an increasing impact of the climate crisis on the economy and financial system, with the central bank’s work aiming to focus on key areas including the impact and risks of the green transition , the growing physical risk of climate change and the risks arising from the loss and degradation of nature.
ECB President Christine Lagarde said:
“A warmer climate and the decline of natural capital are forcing changes in our economy and our financial system. We must understand and keep up with this change to continue to fulfill our mandate.”
The new announcement follows the ECB’s decision in 2022 to make “increasing efforts to tackle climate change” one of its top supervisory priorities, with planned actions including conducting in-depth studies on the climate risk of banks and assessing banks’ compliance with climate risk disclosure requirements. and examining reputational and litigation risks associated with banks’ climate and environmental strategies and risks. The ECB said its increased focus will complement its current climate-related actions in its ongoing tasks, including monetary policy and banking supervision.
The ECB’s new roadmap outlines the key measures and actions planned for each of its new focus areas. Under “navigating the transition to a green economy”, planned actions include assessing the impacts of transition financing on the monetary policy mechanism, assessing green investment needs, analyzing the structural consequences arising from the transition, and advancing the macroeconomic modeling framework, with a focus on climate aspects. In its work to address the physical impacts of climate change, the ECB will promote the integration of climate change impacts into climate scenarios and the framework used for macroeconomic projections, improve the availability of data supporting the physical risk analysis, and investigate the consequences of climate change. adjustment to the economy and the financial sector, including the insurance protection gap and investment needs. The ECB will also analyze the link between climate change and nature degradation and biodiversity loss, and the related economic and financial implications.
The ECB added that the central bank will launch an updated Environmental Management Program in its own operations to support its 2030 CO2 reduction targets, and outlined plans including working on eco-design principles for euro banknotes, and incorporating environmental footprint considerations in the design of the euro banknotes. a digital euro.
“By broadening and intensifying our efforts, we can better understand the implications of these changes and thereby help sustain stability and support the green transition of the economy and financial system.”
click here to access the ECB’s Climate and Nature Plan 2024-2025.