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ECB gives banks deadline for managing ESG risks

European Central Bank to step up enforcement on banks failing to meet ESG deadlines.

Almost all European banks are not doing enough to identify and address climate risks, according to an ECB survey. The ECB last week published a survey of 186 banks with combined assets of €25 trillion, which found that while 85% have some basic practices in place to identify climate risks, 96% have blind spots and continue to significantly underestimate the magnitude of those risks.

'Some institutions have started to use transition planning tools along with targeted client engagement to increase the resilience of their business model over longer time horizons, but a wait-and-see attitude is still common,' the survey said. Implementation of practices was a key concern for the ECB, which expects banks to be fully aligned with its 2020 guidelines by the end of 2024.

By March 2023, the ECB expects banks to "adequately categorise climate and environmental risks and conduct a full assessment of their impact on banks' operations," the ECB said in a statement. And by the end of 2023, banks should have a risk management strategy that includes climate and environmental risks. 'The deadlines will be closely monitored and if necessary we will take enforcement measures,' the ECB said.