European Central Bank Banking Supervision has published an updated report on good practices for climate and nature risk management, drawing together observations from its 2020-25 supervisory programme and illustrating how significant institutions can strengthen strategy, governance, risk appetite, risk management and internal capital adequacy assessment process approaches. The update refreshes the 2022 compendium in light of progress seen through end-2024 and the European Banking Authority Guidelines on the management of ESG risks, which are now applicable to institutions other than small and non-complex institutions. It places particular emphasis on nature-related risks, prudential transition planning, physical risks, and reputational and litigation risks. The ECB says the examples are illustrative only and do not create new supervisory expectations or legal requirements. The report says banks’ alignment with ECB supervisory expectations improved materially over the programme. By end-2024, 56% of institutions had leading practices in place for at least some exposures, up from 3% in 2022, while the share with no practices fell to 5% from 25%. The update refreshes 18 of the original good practices, adds five new ones, and expands dedicated coverage of ICAAP and nature-related risk management using observations from more than 60 institutions, including many smaller banks. Topics covered include transition planning, target setting, client engagement and client transition plans, governance and remuneration, risk appetite indicators, data governance, due diligence, credit and reputational risk classification, collateral valuation and pricing, expected credit loss and capital adequacy, with a separate chapter on managing nature-related risks.
European Central Bank - Banking Supervision 2026-05-08
European Central Bank Banking Supervision publishes updated climate and nature risk management good practices with expanded focus on nature risks and ICAAP
The European Central Bank Banking Supervision has updated its report on good practices for climate and nature risk management, reflecting its 2020-25 supervisory programme and alignment with European Banking Authority ESG risk guidelines. The report refreshes 18 practices, adds five, and expands coverage of internal capital adequacy assessment and nature-related risk management, emphasising transition planning and physical, reputational and litigation risks. The ECB stresses the examples are illustrative and do not introduce new supervisory expectations or legal requirements.