At the ECB industry dialogue on climate and nature risk management in Frankfurt, Executive Board member Frank Elderson stressed that European banks have made “impressive progress” in integrating climate and nature-related (C&N) risks into their operations, but warned against complacency.
Elderson noted that while banks now include C&N risks in stress tests and risk frameworks, application remains uneven across portfolios and risk categories. He urged continued improvement, highlighting that extreme weather could reduce euro area GDP by up to 5% within five years, a shock comparable to the financial crisis.
The ECB will shift its supervisory approach from foundational work to “business-as-usual,” embedding C&N risk oversight into standard inspections, stress testing and fit-and-proper assessments. Elderson also underscored the importance of reliable corporate data under the CSRD, and said transition planning requirements set for 2026 are within banks’ reach.
Pointing to the rapid growth of renewable energy, sustainable finance and transition lending, he described climate transition as both a systemic risk and a major business opportunity for banks. “Taking a step back is not an option,” Elderson said, insisting that staying the course is crucial for financial stability and competitiveness.
