Materiality assessments essential for climate risk management
In a recent blog post on the European Central Bank (ECB) Supervision Blog, Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, underscores the importance of banks’ materiality assessments in managing climate and environmental risks. In the blog, Elderson explores the significance of materiality assessments as a fundamental step towards addressing sustainability-related risks.
Elderson emphasises that materiality assessments are not merely a “nice to have” but rather a prerequisite for banks to effectively manage risks. While acknowledging the progress made by banks in aligning their materiality assessments with supervisory expectations, Elderson highlights that there is still considerable work to be done.
The post highlights the ECB’s efforts to monitor banks’ progress towards meeting supervisory expectations, including periodic penalty payments for non-compliance. While acknowledging improvements in banks’ materiality assessments, Elderson points out areas where more work is needed, such as taking all relevant risk categories into consideration.
With climate and environmental risks, and associated reporting regimes, gaining traction, 2024 is a crucial year for banks to recognise and report material climate risks. The ECB remains committed to supporting banks in this, with the fundamental aim of ensuring a resilient banking sector in the face of climate and environmental challenges.
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