In an open letter to policymakers in the European Parliament, Finance Watch, and 13 partners, including Facing Finance, call to include mandatory transition plans and capital requirements for climate-related risks in their review of the EU banks and insurers prudential rules.
The letter calls for mandatory sustainability targets and governance structures backed by credible and robust transition plans. It highlights how supervised stewardship and engagement through transition planning can help financial institutions reduce exposure to stranded assets. In other words, it would allow them to manage their micro-prudential transition risks on the road to sustainability and by extension, mitigate the systemic risk of disruption from unabated climate change.
Finance Watch and its coalition partners argue that EU prudential regulation should be internally coherent when addressing climate-related risk. In short, Pillar 1 provisions, such as capital requirements, must reflect climate-related financial risks. Co-signing NGOs also warn that if banks and insurers don’t properly account for climate-related risk, a climate-related financial crisis and future bail-outs using public money are a real possibility.
Signatories: Bank Track, Bürgerbewegung Finanzwende, E3G, Facing Finance, Fair Finance International, Fair Finance Sweden, Finance Watch, Frank Bold, International Service for Human Rights, Milieudefensie, Reclaim Finance, ShareAction, Urgewald, WWF European Policy Office