Major EU banks to release ‘pioneer’ climate data

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The skyline of the banking district is pictured in Frankfurt, October 21, 2014. REUTERS/Ralph Orlowski

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LONDON, Jan 24 (Reuters) – The European Union’s big banks will have to show how they are helping or hindering the bloc from meeting climate targets by publishing “pioneering” indicators from 2024, the body said on Monday. EU banking supervision.

The European Banking Authority (EBA) has established environmental, social and governance (ESG) templates that the 150 largest banks such as Deutsche Bank, SocGen and UniCredit must complete each year.

This will allow investors to compare each bank’s exposure to polluting and environmentally friendly companies, and monitor how quickly lenders are adopting more sustainable business models.

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“We are pioneers here with models and key performance indicators to ensure that when banks disclose something, they do so consistently,” said Pilar Gutierrez, head of a disclosure unit at EBA.

Final approval will be needed from the EU executive, the European Commission.

The EBA said the models will cover basic banking books which include loans. It scrapped an initial plan to include trading book assets like stocks and bonds after industry concerns about their short-term nature.

From 2023, banks will have to disclose their exposure to carbon-intensive activities and assets that may be subject to risks such as floods and fires due to climate change.

They will also need to provide details on their exposure to fossil fuel customers, the greenhouse gas emissions they finance and alignment with 2050 net zero targets.

EBA ESG Chart

TWO REPORTS

The requirements innovate globally by requiring banks to publish two new ratios from 2024.

A Green Asset Ratio (GAR) shows a bank’s ‘green’ assets as a proportion of total assets, with green being defined by inclusion in the ‘taxonomy’ or EU checklist.

A Banking Portfolio Taxonomy Alignment Ratio (BTAR) measures the contribution of a bank’s activities to EU climate goals, showing the extent to which it finances environmentally sustainable activities.

Banks will have published GAR, BTAR and greenhouse gas emission reduction targets for 2030.

Both ratios will create peer pressure to adopt more sustainable business strategies and help eradicate the potential for “greenwashing” or the hype of environmentally friendly activities.

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Reporting by Huw Jones; Editing by Kirsten Donovan

Our standards: The Thomson Reuters Trust Principles.

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