Alex Jimenez’s Post

How should banks manage climate transition risk? Recent European Central Bank reports highlight the material risks from misalignment with EU climate goals. The challenge with this approach: It assumes that transition risk to a company’s business, and by extension, credit risk to a bank that lends to that company, stems from misalignment with long-term government policy commitments rather than a disconnect with the pace of transition in the real economy. A new BPI note from Gregory Hopper suggests an alternative methodology to measure transition-driven credit risk, involving estimating the transition-related default risk premium. Read it here: https://lnkd.in/eQ42EdJq #climatetransitionrisk

Are we witnessing a pivotal moment? 🤞 The European Central Bank (ECB) has found evidence that eurozone banks have started to price climate risk in their lending policies.🥂 ECB researchers said the data suggests that banks “appear to differentiate their lending rates based on their clients’ prospective carbon emissions, not just their current ones”. Prior to the study, they said, there was no consensus on this topic, with evidence being “far less clear-cut than that regarding the pricing of climate risk in bond and stock markets”. There were also contrasting views on whether financial sector net-zero commitments were “reliable”. Find the study here👇🏼

Banks and Climate risk assessment: EU Regulators ready to impose fines? Eurozone banks could be hit with fines for falling short on climate-related goals, a senior European Central Bank (ECB) supervisor said in an interview this month. Kerstin af Jochnick, an ECB supervisory board member, told Spanish newspaper Cinco Dias that some banks have not met the ECB’s deadlines for factoring climate risk into how they do business. “We have notified a few banks that, based on our current assessment, they have not met the interim milestones, which means they face the prospect of having to pay a so-called pecuniary penalty,” af Jochnick said.  EU regulations require banks to assess their material risk, including ESG risk, and reflect it in their capital reserves. The ECB could issue daily fines amounting up to 5% of a bank’s daily turnover until resolved, or for up to six months. However, banks have the right to go to the ECB first before any fine is enforced under its periodic penalty payment. #banks #CAFA #OSFI

👉 Bloomberg reported recently that the European Central Bank (ECB) was preparing to impose fines on several lenders for failures to meet deadlines set by the ECB for assessing their exposure to climate risks. A member of the Supervisory Board of the ECB confirmed, however, that ECB has notified a few banks about their failure to meet the interim milestones but none of the banks has been fined yet. 🔗 Read our blog post for more details.  #ECB #climaterisk #climatechange #sustainability

Is climate risk priced or not priced? Which in the world of finance defines the stakeholders who care. Check out the latest findings by the European Central Bank:

"NAVIGATING NATURE-RELATED REGULATIONS FOR BANKS: MAPPING THE POLICY LANDSCAPE" Those who were not able to join the webinar presenting a first-of-its kind report on nature related regulations for banks jointly developed by WWF´s Greening Financial Regulation Initiative and UNEP Finance Initiative, can still watch the recording below. The webinar helps you make sense of nature-related regulatory developments around the world, and how broader policy frameworks interact. It is open to everyone with a focus on representatives of banks, central banks and supervisors, and government policymakers. Part 1 – Report findings; the global state of play of nature-related regulations for banks Part 2 – Case studies on nature-related policy initiatives by central banks #UNEPFI #WWFgreeningfinancialregulation #naturepositive #centralbanks #greenfinance #sustainablefinance #WWFfinance Sem Houben Maud ABDELLI @ Emily R. Dahl Romie Goedicke den Hertog Pina Saphira Siti Kholifatul Rizkiah Adam Ng Jochen Krimphoff Carolin Carella Maria Fernanda Contreras del Valle Laura Canas da Costa

Central banks and financial supervisors are increasingly acknowledging the necessity of tackling nature-related financial risks as part of their prudential mandate - at least 29 jurisdictions totaling more than EUR 75 trillion of banking assets have started to consider nature risk in their prudential frameworks. Join us for a discussion on the rapidly evolving field of nature-related banking regulation for banks on 16 January. We'll share latest insights from our recent report "Navigating Nature-related Regulations for Banks" (https://lnkd.in/gHNYyCRZ). We're thrilled to be joined by Marc Reinke Guan Schellekens Katie Lee Sem Houben Pina Saphira Siti Kholifatul Rizkiah Maud ABDELLI Romie Goedicke den Hertog Elodie Feller

Enabling banking representatives, central bankers, supervisors, and government policymakers to navigate global nature-related regulatory developments and understand their intersection with broader policy frameworks is crucial for integrating sustainable finance into the financial community's business strategies. Peter Chipeta FCCA, CA (M), MBA, BSc (Hons) this can be good virtual meeting for Malawi Agricultural & Industrial Investment Corporation (MAIIC) as a DFI..

Taking a break from disclosure. 🤔 Important remarks from Claudia Buch, European Central Bank…”A widening insurance protection gap may have negative implications for the financial system and the availability of credit. Financial institutions may reduce the provision of credit in regions which are materially exposed to physical risk. Risks to financial stability may increase if many financial institutions are simultaneously affected by adverse shocks.”… & “Transition plans are an important element of risk management.” Read on 👇

Eurozone banks could be hit with fines for falling short on climate-related goals. Kerstin af Jochnick, a European Central Bank supervisory board member, told Spanish newspaper Cinco Días that some banks have not met the ECB’s deadlines for factoring climate risk into how they do business. “We have notified a few banks that, based on our current assessment, they have not met the interim milestones, which means they face the prospect of having to pay a so-called pecuniary penalty,” af Jochnick said. EU regulations require banks to assess their material risk, including ESG risk, and reflect it in their capital reserves. The ECB could issue daily fines amounting up to 5% of a bank’s daily turnover until resolved, or for up to six months. However, banks have the right to go to the  ECB first before any fine is enforced under its periodic penalty payment. While af Jochnick did not say how many or which banks would be fined, Bloomberg first reported that the ECB “is set to take the unprecedented step of imposing fines” on “as many as four lenders.” Some environmental advocates are sceptical that the ECB’s fines will put much pressure on banks to implement systemic change. The fines are process-based rather than content-based, James Vaccaro, of the Climate Safe Lending Network, told Green Central Banking. GreenCB.co/3RwMMeB #ECB #climaterisk #climatechange