ECB concludes climate and nature plan, outlines new priorities
The European Central Bank (ECB) has concluded its 2024-2025 climate and nature plan, successfully embedding related risks into its day-to-day processes. The ECB remains committed to addressing the growing economic and financial impacts of climate change and nature degradation.
Integrating risks across core functions
The European Central Bank has successfully embedded climate and nature-related risks into its core work, concluding its 2024-2025 plan.
This involved strengthening integration within the monetary policy framework, including the Eurosystem's collateral framework and corporate bond holdings, and incorporating climate considerations into macroeconomic assessments.
Data and risk assessment capabilities were enhanced through climate stress testing, scenario analysis, and updated statistical indicators for sustainable finance monitoring.
ECB Banking Supervision improved banks' ability to assess these risks, supported by continuous follow-up and binding decisions.
The ECB also integrated climate considerations into its non-monetary policy portfolios and reduced emissions from its own operations by 39% in 2024 compared with 2019.
Research on nature-related risks highlighted their deep interconnectedness with the euro area economy, identifying water-related risks as particularly material.
Three pillars for future action
The ECB remains firmly committed to embedding climate and nature into its work, outlining three priority areas for future intensification.
These include the transition to a green economy, focusing on banks' prudential transition plans and operational framework integration.
Secondly, the ECB will address the growing physical impacts of climate change on the economy and financial system by strengthening macroeconomic analysis, improving data, and assessing banks' capabilities.
Thirdly, work will advance on the impact of nature-related risks and ecosystem degradation, including assessing water-related risks.
These priorities will complement ongoing actions in monetary policy, banking supervision, and financial stability.
Foundational, not revolutionary
This comprehensive plan underscores the ECB's commitment to integrating climate and nature risks, establishing a robust framework for future action.
While the achievements are significant, they represent foundational steps in a long-term, evolving challenge for central banking.
The outlined priorities indicate a pragmatic recognition that these risks will increasingly shape economic and financial stability, requiring continuous adaptation.