Introduction to Eurosystem’s Climate-Related Financial Disclosures

Since 2023, the Eurosystem central banks have undertaken the important initiative of publishing annual climate-related financial disclosures, showcasing their commitment to transparency and accountability regarding the impact of climate change on their financial portfolios.

Objectives of the Disclosures

The primary aim of these disclosures is to enhance clarity regarding the climate impact of the Eurosystem’s financial portfolios and to outline their exposure to various climate risks. These efforts are integral to fostering awareness about climate concerns across the financial industry, promoting standardized disclosure practices that align with evolving market standards, and supporting the European Union’s broader aims for climate neutrality and the transition to a low-carbon economy.

Scope and Coverage of Portfolios

All Eurosystem central banks are mandated to disclose climate-related information pertaining to their non-monetary policy portfolios that they manage independently. Furthermore, these disclosures extend to public sector bonds, corporate bonds, and covered bonds held for monetary policy purposes through the asset purchase programme (APP) and the pandemic emergency purchase programme (PEPP). The ECB’s ongoing assessments ensure that these disclosures remain relevant and align with advancements in data and methodologies.

Limitations of the Disclosures

The Eurosystem explicitly notes that climate-related information is not provided for its entire balance sheet. Disclosures are limited to assets for which adequate climate data is available. Certain assets, including those under the asset-backed securities purchase programme (ABSPP) and physical holdings like gold, are excluded due to insufficient climate data or methodological frameworks. Continuous engagement with standard-setters and climate data providers is aimed at improving the data availability and accuracy over time.

Methodological Framework

The methodologies applied for the climate-related financial disclosures are grounded in principles collectively developed by the Eurosystem members, focusing primarily on non-monetary portfolios. These principles are periodically reviewed and are aligned with the recommendations from recognized entities such as the Task Force on Climate-related Financial Disclosures (TCFD) and the Partnership for Carbon Accounting Financials (PCAF). Adjustments tailored to the specifics of the Eurosystem portfolios are utilized to ensure relevancy and accuracy in reporting.

Inclusion of Nature-Related Risks

In a significant stride, starting in 2025, select Eurosystem central banks, including the ECB, introduced nature-related indicators in their reports. These indicators measure corporate holdings’ exposure to sectors significantly impacting or dependent on natural ecosystems. Enhanced data collection and evaluation will be pursued to expand the reporting on nature-related disclosures in the coming years.

Data Utilization and Reporting Metrics

For its reports in 2026, the Eurosystem has primarily relied on climate and financial data from Institutional Shareholder Services (ISS), indicating a shift in data provision that stemmed from the conclusion of their contract with a previous provider. The centralized procurement process identified a focus on data quality and comprehensiveness, setting the foundation for future disclosures. This year, issuers’ emissions data, particularly for non-sovereign entities, are integrated with certain time delays, maintaining consistency across the financial and climate metrics used.

Defining Emission Reduction Targets

Integral to the TCFD recommendations, the establishment of targets for emissions reduction is vital for managing the climate-related risks and impacts associated with asset holdings. The Eurosystem is committed to ensuring its portfolios support the Paris Agreement objectives, including achieving net-zero greenhouse gas emissions by 2050. Progress towards these targets involves continuous monitoring and assessment, enabling timely adjustments to portfolio management strategies.

Future of Climate-Related Financial Disclosures

The Eurosystem is dedicated to the annual publication of these disclosures, emphasizing continuous improvement in the quality of reported information. Regular reviews will ensure that the frameworks for reporting, including portfolio inclusion and data quality, remain dynamic and effective in addressing emerging climate challenges. The initiative represents a significant progression in integrating climate accountability into the financial operations of the Eurosystem.