Thematic Review on climate risk Results and good practices at participating German credit institutions
This year’s SSM-wide thematic review by the ECB on climate-related and environmental (C&E) risks covered 107 significant institutions (SIs) and 79 less significant institutions (LSIs). The Bundesbank and BaFin, together with six other national supervisory authorities, took up the opportunity to participate in this exercise with a selection of large LSIs. For reasons of proportionality and materiality, the German LSIs were given a questionnaire that had been tailored to the type of institution, other complementary supervisory exercises and the national context.
The thematic review set out to assess the soundness, comprehensiveness and effectiveness of institutions’ practices to manage C&E risks in the areas of business environment and strategy, governance and risk appetite, risk management framework, and credit risk. The results of the thematic review confirm that proper C&E-related risk governance is still in its infancy at the German LSIs. Only a handful of LSIs have implemented advanced approaches; the majority of them have basic practices in place. A deeper dive into the results and a presentation of good practices can be found in BaFin’s expert article on this topic.