In its first-ever move, The European Central Bank is planning to fine several banks for failing to address the impact of climate change. Up to four banks could face penalties for missing deadlines set by the ECB to assess their climate risks.
The exact amounts of the fines are still under consideration and might be primarily symbolic, according to a spokesperson for the ECB, which oversees over 100 banks.
Also read: Corporate climate watchdog tightens rules for asset managers and banks
The ECB has consistently cautioned that banks are not adequately preparing for the impact of extreme weather events on asset values nor for the risk of clients with significant carbon footprints going bankrupt.
They have indicated that they initially warned 18 banks of potential penalties, suggesting that their pressure yields results for most of these firms.
The fines accumulate daily and could reach up to 5% of a bank’s daily average revenue. For instance, a bank earning €10 billion ($10.9 billion) annually could face daily penalties of up to €1.4 million in the most severe scenario. However, the actual fines imposed may be considerably lower.
Frank Elderson, a member of the ECB’s Executive Board, appears committed to advancing European initiatives on climate change. In a blog post, Elderson says, “A materiality assessment is not just a ‘nice to have’—knowing your risks is a precondition for being able to address them.”
