Sustainable Banking

Link

Key milestones

SFDR applies from March 10, onwards.
On April 21, the European Commission published a proposal for the CSRD, revising the NFRD.
Level 1 SFDR reporting deadline of June 30 applies to FMPs.
Adoption of the proposal for a EU Green Bond Standard and the renewed Sustainable Finance Strategy on July 6.
Publication of the Disclosures Delegated Act and Climate Delegated Act of the EU Taxonomy.

Benchmark providers need to report on how methodology aligns with Paris Agreement targets.
From January SFDR RTS apply.
EBA published Pillar 3 draft ITS
EFRAG published first European Sustainability Reporting Standards (ESRS)
As of June, banks must report on physical and transitory climate risks under CRR (EU) 2013/575
MiFID II delegated regulation requires investment advisors to consider clients’ sustainability preferences.
ECB Stress Test on resilience of European banks to shocks from physical and transitional climate risks.
European Commission will adopt first set of ESRS.

First mandatory reporting on Taxonomy alignment by corporates and eligibility by FMPs for the financial year 2022.
Publication of the Environmental Delegated Act, expanding the EU Taxonomy to all six environmental objectives.
SFDR reporting deadline for FMPs, including additional requirements under the SFDR RTS.
European Commission will adopt second set of ESRS.

In-scope companies will publish first reports reflecting new reporting requirements under CSRD, covering financial year 2023.
Listed SMEs, excluding micro enterprises, may voluntarily disclose KPIs and targets until it becomes mandatory from 2027, for the financial year 2026, onwards.

SMEs disclose voluntarily KPIs/Targets.

Link

Innovation - published IBM article in Sept 2021

A constantly evolving path in Sustainability and Climate Risk obligations for German Banking & Financial Markets – but the direction is unmistakable

To say that the past 3 months brought sustainability and climate risks to the forefront of social and political life in Germany would be an understatement. The most important task right now is to assuage people’s suffering and restore a sense of normality to the areas most affected by the devastating July floods. What should not be forgotten, though, is that the political and economic institutions (both within and outside Germany) have also been evolving quite significantly in the same timeframe, as if to keep apace in a relentless race against time.

Read article →

Marinela Bilic-Nosic

Executive Partner Banking
Regulatory, Risk, Compliance Lead DACH

Johannes Giannakouros

Risk, Legal & Regulatory Compliance Advisory

Descriptions

Provide services to access data insights
Enable faster data driven decision making
Ensure data quality
Manage internal and external data sources

Questions

How to build AI models?
What data analytics tools are available?
How to manage the data quality?
How to access external data sources?
Where to host the data and the analytics?
How do I create operationalise a data science service?

Climate change

Carbon emissions
Product Carbon Footprint
Financing Environmental Impact
Climate Change Vulnerability

Natural capital

Water stress
Biodiversity & Land Use
Raw Material Structuring

Descriptions

Toxic Emissions & Waste
Packaging Material & Waste
Electronic Waste

Environment Opportunities

Opportunities in Clean Tech, Green Building & Renewable Energy

Human Capital

Labor Management
Health & Safety
Human Capital Development
Supply Chain Labor Standards

Product Liability

Product Safety & Quality
Chemical Safety
Privacy & Data Security
Responsible Investment
Insuring Health & Demographic Risk

Stakeholder Opposition & Social Opportunities

Corporate Governance

Board
Pay
Ownership
Accounting

Corporate Behavior

Business Ethics
Anti-Competitive Practices
Corruption & Instability
Financial System Instability
Tax Transparency

Link

Regulatory deep dive

Climate benchmarks

Link

The architecture of European banking supervision

European banking supervision is based on cooperation between the ECB & national supervisors

Distribution of tasks within the SSM

The Single Supervisory Mechanism (SSM) is one of the largest banking supervisory authorities in the world
Currently 125 banking groups in 19 countries are under direct ECB supervision
Around 3,200 smaller institutions are directly supervised by the National Competent Authorities (NCAs), with the ECB being responsible for the system at large
Banking assets under direct and indirect ECB supervision amount to more than 26 trillion Euros about 2.6 times euro-area GDP

Read source

What exactly do supervisors look at?

1. Business model
2. Internal governance
3. Risks to Capital
4. Risks to Liquidity

Read source

Annual stress tests

EU law requires the ECB to carry out stress tests on supervised banks at least once per year
The results of annual stress tests provide important input to the SREP process for the test year
EU-wide stress tests - Every two years the EBA carries out EU-wide stress tests
Thematic stress tests - In years when there is no EU-wide EBA stress test the ECB tests significant institutions under its direct supervision against a specific kind of shock (2022 Climate Risk Stress Test)

Read source

What informs the Supervisory Review and Evaluation (SREP) process?

Stress tests: Supervisors use stress tests to identify and address banks’ vulnerabilities early on in the SREP process
Supervisory priorities: Every year ECB Banking Supervision sets its supervisory priorities that will guide the SREP in the year ahead
Risk assessment: Every year ECB Banking Supervision identifies and assesses the risks banks face to determine focus areas for the SREP

Read source

Link