The State of Climate and Environmental Risk Management in the Banking Sector

The European Central Bank (‘ECB’) indicates that financial institutions are launching green mortgages and targeted products aimed at promoting the renovation of buildings and improvements in energy efficiency certificates.

Banks are moving ahead with reviewing their real estate collateral valuations by assessing energy certifications of buildings and tracking share of homes with an energy-efficient certificate as part of total collateral of the portfolio.

While financial institutions are increasingly considering the materiality of physical and transition risk exposure there is limited evidence that this information is integrated into their lending and monitoring practices.