The Bank of Italy published a supervisory note analysing ESG information disclosed in 2024 by a sample of Italian and other European banks in their Pillar 3 and non-financial reports, including a first look at the Green Asset Ratio (GAR) as reported by intermediaries. The analysis finds that most banks continue to face widespread difficulties in obtaining ESG information on counterparties, often linked to limited access to databases on companies’ and households’ energy consumption. Italian banks are described as gradually improving in retrieving and processing higher-quality data, including a greater ability than the previous year to measure transition risk linked to real estate collateral. Exposures to non-financial companies in sectors that contribute heavily to climate change remain high across banks, exposures subject to physical risk are also sizeable, and initial GAR values are very low. The note flags that the low initial GAR values raise questions about how the indicator is constructed and points to discussions at European level on potential improvements to increase its meaningfulness.
Bank of Italy 2025-03-28
Bank of Italy reviews banks’ 2024 ESG disclosures and highlights counterparty data gaps and very low Green Asset Ratios
The Bank of Italy's supervisory note on 2024 ESG disclosures by Italian and European banks highlights challenges in obtaining ESG data, especially on energy consumption. Italian banks show progress in data quality and transition risk measurement, but exposures to high climate-impact sectors remain significant, and initial Green Asset Ratio (GAR) values are low. The note suggests low GAR values prompt discussions on enhancing the indicator's construction at the European level.