European Central Bank Stress Tests Show How Few Banks Can Synthesise New Climate Risk Data to Improve Their Strategy or Financing Decisions

Data gaps do play a part in limiting banks’ ability to understand their climate-related financial risks. But banks that don’t develop climate stress-testing capabilities, or those that do but don’t use them to inform strategy or credit decisions, are impairing their ability to use the data that exist today and to synthesise the data they get from customers.

European Central Bank (ECB) stress tests have found that EUR 70 billion is at risk from the impact of climate change, although that is likely to understate the true risk levelLess than half of European banks currently undertake climate stress testing, and even fewer use climate stress testing to inform strategy (16%) or make financing decisions (8%)Lack of data does slow climate risk meas...