Sat. Mar 2nd, 2024

TLDR: A report by the European Central Bank (ECB) has found that 90% of European banks’ loan portfolios are not aligned with global climate goals and the EU’s 2050 climate neutrality target. The report assessed the credit portfolios of 95 banks, representing 75% of euro area loans, and found that only 8 out of 95 banks had lending practices in line with the 2050 net zero pathway. The report highlighted the risks of financing companies that are lagging in reducing high-carbon production and developing renewable energy sources. It also noted the prevalence of reputational and litigation risks for around 70% of banks. Despite 72 banks committing to net zero, 93% have not yet aligned their strategies and internal processes to achieve this objective. The report emphasised the importance of aligning financing practices with decarbonisation to avoid exacerbating climate-related risks.