The European Banking Authority (EBA) is rethinking its advisory reporting regime, and new rules could shake up how banks report on certain ESG matters. The regulator announced its new proposal last month. New rules would focus less on Taxonomy alignment and more on direct climate and nature-related risks. Responsible Investor reports:
“The European Banking Authority has proposed significant changes to the types of sustainability information that EU banks will be expected to disclose, according to a consultation paper. The supervisor has removed all taxonomy-related alignment ratios from supervisory reporting requirements, but has added new disclosure requirements on counterparties most exposed to climate change – including information on transition plans and alignment with sectoral decarbonisation pathways. Banks will also be asked to report information on environmental performance beyond climate change, including biodiversity loss and invasive species.”
The EBA will consult on the new disclosure requirements until July 10. These changes reflect a theme seen in both the recent ECB report and the ISS report I blogged on today. Nature-related risks are currently underestimated. When a risk is underpriced, it often hits the financial sector the hardest and can create systemic risk. By focusing on direct risks rather than taxonomy alignment, the EBA seems to be shining a spotlight on an area where risk management may be deficient.
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