Sweden's Riksbank examines the Green Asset Ratio and finds taxonomy-aligned assets remain a small share of large banks’ balance sheets

Sweden's Riksbank published an Economic Commentary by Niklas Frykström assessing how to evaluate how “green” a bank is, focusing on the EU’s Green Asset Ratio (GAR) and the need for transparent, comparable metrics to track banks’ climate-related progress and risks. The Commentary notes that current GAR disclosures by large listed banks indicate that only a very limited part of banks’ balance sheets is green under the EU taxonomy. GAR measures taxonomy-aligned green assets as a share of covered assets, with exposures to government securities, central banks and trading books excluded from the denominator. Aggregate data for the major Swedish banks show SEK 125 billion of taxonomy-compliant green assets at end-2023 (including SEK 105 billion of green mortgages), implying a GAR of 1.9 per cent, while excluded assets amounted to around 27 per cent of the balance sheet (SEK 2,440 billion), largely liquidity reserves. The analysis highlights that energy-efficiency data constraints limit the classification of green mortgages, and discusses complementary indicators including the voluntary Banking Book Taxonomy Alignment Ratio (BTAR) and Pillar 3 disclosures on exposures to carbon-intensive sectors, where corporate lending to such sectors averages about 84 per cent for the major Swedish banks. The Commentary expects GAR to increase as sustainability reporting expands under the Corporate Sustainability Reporting Directive and as building energy performance data improves, and notes that large listed EU banks report GAR semi-annually, with the next disclosure due in spring 2025.