Banks must continue improving climate risk disclosures as new EU rules take effect, ECB report shows

The ECB published its third review of the disclosure of C&E risks among SIs and a selected number of LSIs entitled The importance of being transparent – A review of climate-related and environmental risks disclosures practices and trends.
The review is based on the expectations set out by the ECB in its [Guide on climate-related and environmental risks](), which was published in November 2020 to ensure that the banking sector discloses C&E risks effectively and comprehensively. The review covered 103 SIs and 28 LSIs, and the disclosures of 12 G-SIBs established outside the European Union (EU) were benchmarked against the disclosures of the EU banks within the scope of the assessment.
The outcome of the review shows that the majority of SIs now disclose at least basic information for most of the expectations. However, banks still need to close remaining gaps to disclose all relevant C&E risk information as only 34% of the banks disclose information on all categories.
The review found that while significant progress could be observed across the board as regards the existence of disclosures for all categories, most of the additional information available to users remains qualitative and often generic. For three-quarters of the institutions, the level of substantiation of the disclosures was deemed insufficient. Moreover, even where metrics and targets are disclosed, banks often provide limited information on portfolio coverage and definitions and methodologies used to produce the respective information.
The review identified a group of institutions that persistently lag behind in their disclosures. While in 2021 disclosures were assessed as insufficient overall for 45% of banks, this is now the case for only 15% of banks, of which six were assessed as insufficient in all disclosure categories.
The review also assessed the disclosures of G-SIBs with a parent entity outside the EU and found that G-SIBs with a parent in the EU performed better than the others. Notwithstanding a noteworthy amount of C&E-related information disclosed by all G-SIBs, and in particular by a number of Asian and North American banks, some differences were observed in terms of disclosures of materiality assessment, risk management, and metrics and targets, showing different levels of advancement across the board.
The quality of the disclosures remains low and is unlikely to provide market participants with insights on which they can act. Banks need to close remaining gaps to disclose all relevant C&E risk information, and compliance with the EBA ITS will be subject to further supervisory scrutiny and follow-up in accordance with the respective dates of implementation.