European Central Bank’s Mandate to Engage with Capital Markets Segment of Green and Sustainable Finance

The ECB is expected to devote the 2022 stress test for banks to the topic of climate change. Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, states “financial institutions, including banks, need to ensure they can identify at an early stage, and deal with, the risks emerging from the effects of climate change and a rapid transition to a carbon-neutral economy”. Merch cites the importance EU ecolabel for financial products and investment funds in providing retail investors with an understanding of the environmental impact of investment. The ECB will soon publish a “Guide on Climate-Related and Environmental Risks”. The Guide sets out how institutions should integrate climate and environmental risks into business strategies, governance and risk management frameworks and how these are to be disclosed. The ECB will also soon be publishing a report on the disclosure of environmental risks of the banks under thier supervision.