Financial regulators must assess environmental risks, EU rules | WWF

Financial regulators must assess environmental risks, EU rules

Posted on 21 March 2019
The EU is a leader in sustainable finance, but it can do more!
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Brussels, Belgium - 21 March 2019

The European financial sector will be made more aware of the environmental risks it faces, thanks to a forward-looking agreement between European Council, Parliament and Commission today.

The EU mandated the three European financial regulators - the Supervisory Authorities (ESAs) - to draw up a methodology to assess the impact of environmental risks on the stability of Europe’s finance institutions. Currently some such methodologies exist, but assessments are not yet widely carried out: including it in the ESAs’ mandate should change that.

Sebastien Godinot, economist at WWF European Policy Office, said:
“This EU decision will go a long way to helping environmental risk to the finance sector be assessed systematically and consistently. We urge ESAs to start with the climate part of the methodology and finalise it by 2020: the longer the delay, the higher the potential cost”.

The European Council, Parliament and Commission reached the decision on ESAs as part of their agreement today on the EU European Supervisory Authorities legislative package. The ESAs are responsible for supervising the finance sector and coordinating national finance authorities.

The next regulation that will be finalised in the EU sustainable finance agenda is the taxonomy, which sets out how sustainable investments are. On this, the Parliament will need to correct its failed committee vote by an ambitious plenary vote next Thursday.

More information
Assessing the climate risks of financial portfolios is a recommendation of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD)[1]. Such assessments are already technically feasible, for example with a free online tool called ‘PACTA’ [2]. The PACTA tool has already been used by several national supervisors and central banks and hundreds of investors globally.

[1] The Financial Stability Board (FSB) is an international body that monitors and makes recommendations about the global financial system. It set up the Task Force on Climate-related Financial Disclosures to develop recommendations for voluntary climate-related financial disclosures that are consistent, comparable, reliable, clear, and efficient, and provide decision-useful information to lenders, insurers and investors.

[2]  See https://www.transitionmonitor.com/en/home/ and

https://www.unpri.org/news-and-press/launch-of-first-online-and-free-climate-scenario-based-analysis-tool/3571.article

Contact
Sébastien Godinot
Economist, WWF European Policy Office
+32 489 46 13 14

Sarah Azau
Senior Communications Officer, WWF European Policy Office
+32 473 57 31 37
sazau@wwf.eu
The EU is a leader in sustainable finance, but it can do more!
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