The European Central Bank (ECB) has published an article reviewing how its climate change centre has helped integrate climate and nature risks into monetary policy, banking supervision and market operations during its first five years. Established in 2021, the centre coordinates work across the institution, including the climate and nature plan 2024-25, which extended research and analysis to nature risks.
Operational progress includes incorporating climate factors into the Eurosystem collateral framework for marketable assets issued by non-financial corporations in 2026. The previously announced extension to corporate credit claims is planned for 2027. Climate risks have also been incorporated into macroeconomic projections and balance sheet stress tests. In banking supervision, a gradual and targeted approach to forthcoming prudential transition planning requirements forms part of the supervisory priorities for 2026-28, alongside continued monitoring of banks’ management of climate and nature risks.
Further analytical work will concentrate on the green transition, physical climate risks and nature degradation. Priorities include improving physical risk data and exposure assessment methods, and examining the economic and financial consequences of insurance gaps. Less than one-quarter of EU natural catastrophe losses are insured, creating potential spillovers to banks. Existing research also finds that nearly 75% of banks’ corporate lending goes to firms highly dependent on at least one ecosystem service. Planned work includes developing nature risk scenarios, examining banks’ risk management and building an analytical framework with other central banks in the European System of Central Banks to assess rising water stress.