European banks have a long way to go on sustainability – BlackRock study

The facade of the European Commission headquarters is reflected in the windows of the EU Council building in Brussels, Belgium, April 5, 2019. REUTERS/Francois Lenoir

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LONDON/BRUSSELS, Dec 14 (Reuters) – European banks are not integrating climate change and other sustainability concerns into their risk management systems as quickly as regulators expect, an expert revealed on Monday. BlackRock study for the European Union.

In an interim report, BlackRock said it analyzed feedback from lenders in the region and found that most were just beginning to reflect environmental, social and governance (ESG) risks in their internal processes.

A final report, which will be used by Brussels to help develop new regulations, is expected by April next year.

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“While surveyed banks often report that they have initiatives in place to improve ESG risk integration, the majority have not formalized an ESG risk integration strategy with clear timelines and responsibilities,” did he declare.

“When it comes to climate risk, many smaller banks said they had not yet started integrating it into risk management,” the report said.

It also found that only a minority of regulators provide advice to banks on ESG risks or reflect them in their oversight processes, for example through climate-related stress tests.

“The majority of supervisors surveyed have not yet implemented quantitative indicators to monitor and assess supervised banks’ exposure to ESG risks,” the report said.

While some banks have started launching ESG-related products and committing to the terms of the Paris Climate Accord, the report says that many civil society organizations believe , efforts by lenders have so far been insufficient.

“The Commission is committed to transparency. As promised, today we published BlackRock’s interim report,” a European Commission spokesperson said. “This report is only a preliminary analysis of the data collected so far. The final report is to be submitted to the Commission at a later stage.”

The EU’s appointment in April of the world’s largest asset manager to help plan future prudential regulations raised concerns about conflicts of interest.

While the bloc’s ombudsman said last month that the Commission failed to properly review these disputes, she did not cancel the contract.

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Reporting by Simon Jessop and Kate Abnett; Editing by David Clarke

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