The European Banking Authority launched a new environmental, social and governance dashboard on Friday, aimed at enhancing oversight of climate-related risks in the European Union and European Economic Area banking sector.
Based on banks’ Pillar 3 ESG disclosures, the tool provides key indicators for assessing transition and physical climate risks, including exposure to carbon-intensive sectors, energy efficiency of mortgage collateral and green asset alignment with EU sustainability goals.
Banks Face High Transition Risk from Carbon-Intensive Sectors
According to the EBA, over 70 percent of banks’ corporate exposures in most EU or EEA countries are tied to sectors that significantly contribute to climate change, suggesting a high vulnerability to transition risks.
These risks may materialize through policy changes, technological shifts or evolving consumer preferences.
“The dashboard provides centralized access to comparable ESG data, improving transparency and helping supervisors, banks and stakeholders assess potential climate-related vulnerabilities,” the EBA said in a statement.
Low Physical Risk, Modest Green Lending
In contrast, physical climate risk exposure — such as from floods or heatwaves — remains below 30 percent in most jurisdictions.
However, the EBA noted considerable variation in how banks assess and disclose geographical exposure, leading to differences in reported risk levels.
The dashboard also sheds light on energy efficiency in real estate lending. Around half of EU property-backed loans fall within the first two buckets of energy efficiency or below 200 kilowatt-hours per square meter
However, banks often rely on estimates or proxies for this data, warranting caution in interpretation.
Green lending aligned with the EU Taxonomy remains modest. The Green Asset Ratio — a key metric for measuring sustainable finance — averages just under 3 percent, with significant variation across countries and institutions.
A more refined metric, the loan GAR, shows higher alignment levels, though still limited by the transitional nature of the broader economy.
Next Steps and Regulatory Outlook
The initiative supports the European Commission’s goal to integrate climate risk monitoring into financial stability assessments and fulfills EBA’s mandate under Article 29(f) of its founding regulation. The indicators reflect data from end-2023 and mid-2024 and will be updated regularly, the regulator said.
The EBA acknowledged that further refinements are expected as ESG disclosure templates evolve and regulatory changes, particularly around the GAR, are implemented.
