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The new indicators are either experimental or analytical. Experimental data comply with many, but not all, of the quality requirements of official ECB statistics. Analytical data have a lower quality and certain—sometimes significant—limitations. To ensure the indicators are accessible and replicable, they use existing data from the European System of Central Banks (ESCB) or other, publicly available, data whenever possible, according to a press release by ECB.
The European Central Bank has published a first set of climate-related statistical indicators to better assess the impact of climate-related risks on the financial sector and to monitor the development of sustainable and green finance. The indicators are intended to understand how to better capture data on climate-related risks and the green transition.
Experimental indicators on sustainable finance provide an overview of debt instruments labelled as ‘green,’ ‘social,’ ‘sustainability,’ or ‘sustainability-linked’ by the issuer that are issued or held in the euro area. The data show that the volume of sustainable and green bonds has more than doubled over the last two years and grew much faster than the overall euro area bond market. Besides boosting transparency, these indicators also help track progress on the transition to a net-zero economy. That said, the lack of internationally accepted and harmonised standards on what defines a green or sustainable bond makes the data less reliable overall.
Analytical indicators on carbon emissions financed by financial institutions provide information on the carbon intensity of the securities and loan portfolios of financial institutions, and on the financial sector’s exposure to counterparties with carbon-intensive business models. Preliminary results show that in the euro area, most of the emissions financed via equity or bonds are held by investment funds. However, the data suggest that the most carbon-intensive activities are financed via the banking sector, as the companies they finance produce relatively more emissions in their business operations to achieve a given level of revenue.
Analytical indicators on climate-related physical risks analyse the impact of natural hazards, such as floods, wildfires, or storms, on the performance of loans, bonds, and equities portfolios. While the risk of windstorms broadly affects financial portfolios in the euro area, the risk of this hazard causing severe damage is rather low. In contrast, floods are limited to coastal and river areas but are estimated to have a higher level of damages and losses.
“We need a better understanding of how climate change will affect the financial sector, and vice versa. For this, the development of high-quality data is key,” said executive board member Isabel Schnabel. “The indicators are a first step to help narrow the climate data gap, which is crucial to make further progress towards a climate-neutral economy.”
Fibre2Fashion News Desk (NB)
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