EU Weighs Stress Tests to Improve Financial Firms’ Buffers Against Climate Risks
The move would represent a major change in the bloc’s climate policy which has so far focused on encouraging firms to adopt greener policies voluntarily.
Valdis Dombrovskis said the European Union executive commission will explore ways to improve financial firms’ management of climate and environmental risks and increase their defenses against natural disasters and other possible financial losses caused by climate change. “That will mean assessing whether we need to make any regulatory changes to ensure better reporting and monitoring of climate-related risks,” Dombrovskis said.
He added that the new commission, which is expected to take office in December, will also look into ways “to integrate sustainability risks into financial stability monitoring and supervision mechanisms, like stress testing and scenario analysis.”
This higher scrutiny could force insurers and other financial firms to increase their buffers against climate risks.
The move would be part of a wider strategy to help the transition to a greener economy.
New EU rules on disclosing the climate impact of asset managers’ investing strategies have been recently agreed and will kick in from 2021.
EU standards on what make a responsible investment and a green bond are under negotiation, and the bloc is considering phasing out funding of fossil fuel projects by its top financial arm, the European Investment Bank.
Dombrovskis, who has been the EU finance chief for the past five years and has had his mandate renewed, said the commission would also explore standards and labels for green mortgages and loans to help owners upgrade their houses.
Buildings are responsible for a big chunk of carbon emissions, with three-quarters of them in the 28-country European Union being energy inefficient, according to EU data.
(Reporting by Francesco Guarascio @fraguarascio; editing by Catherine Evans)
- Giant Sinkhole Swallows Center of Illinois Soccer Field
- Washington Insurance Commissioner Fines Unite Health, Others $500K for Violations
- Jury Awards $68.5M to Family of Worker Who Fell to Death at Philly Construction Site
- NY Plane Crash Kills 5 Members of Georgia Family, Including Former Insurance Analyst