The European Central Bank (ECB) says it has concluded its climate and nature plan for 2024-2025, further embedding climate and nature-related risks into the institution’s day-to-day work as it refines how those risks feed into policy, supervision and internal operations.
Over the past two years, the ECB has sharpened its approach to assessing climate and nature-related risks and the ways those considerations influence policy decisions.
It also reports progress in how it supervises banks, manages its portfolios and runs its own operations, framing the work as part of its mandate to support price stability while helping safeguard the resilience of the European banking system.
In monetary policy, the ECB says climate and nature considerations are now more tightly woven into its framework, including within the Eurosystem collateral framework. It also points to reduced carbon emissions associated with the Eurosystem’s corporate bond holdings and says climate-related policies are now incorporated into macroeconomic assessments and projections, including transition measures such as Emissions Trading System 2.
On data and risk measurement, the ECB says it has carried out and contributed to climate stress testing and scenario analysis, including the Fit-for-55 exercise. It also highlights its role in leading work to design climate scenarios within the Network for Greening the Financial System, alongside updates to statistical climate indicators. The ECB says those indicators now draw on new methodologies and data to improve monitoring of sustainable finance trends, carbon-emissions reduction efforts and the impacts of climate-related physical hazards.
The ECB also argues the banking sector is becoming more capable of assessing climate and nature risks, pointing to ongoing follow-up from ECB Banking Supervision, including the issuance of binding decisions where required. Separately, it says it has continued integrating climate considerations into its non-monetary policy portfolios, while reducing emissions from its own operations by 39% in 2024 compared with 2019, in line with its 2030 environmental targets.
Nature has been elevated further too. The ECB says its updated monetary policy strategy statement explicitly acknowledges the implications of nature degradation for monetary policy, while its research has highlighted strong interconnections between nature and the euro area economy, with water-related risks identified as the most material.
Looking ahead, the ECB says it will intensify work across three priority areas: supporting the transition to a green economy (including assessing banks’ prudential transition plans and analysing energy and fiscal costs), strengthening analysis of physical climate impacts through better data and monitoring, and deepening work on nature-related risks, including the effects of water-related shocks.
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