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FAQ on Eurosystem climate-related financial disclosures

As of 2023, all central banks of the Eurosystem publish annual climate-related financial disclosures.

The responses to the following frequently asked questions (FAQ) provide information on these disclosures, including their scope, the data used and the methodology behind them.

Further details on Eurosystem members’ climate-related financial disclosures can be found in our press release and the dedicated section of our website.

Q1 Why does the Eurosystem publish climate-related financial disclosures?

Through its climate-related financial disclosures, the Eurosystem aims to enhance transparency about the climate impact of its portfolios and their exposure to climate risks. More broadly, the disclosures enhance awareness and understanding of climate risks across the financial sector, promote the harmonisation of disclosure practices by following established market standards, and support the European Union’s objectives of climate neutrality and transition to a low-carbon economy.

Q2 Which portfolios are affected by the disclosures?

All Eurosystem central banks disclose climate-related information on their euro-denominated non-monetary policy portfolios, which they manage under their own responsibility. In addition, the Eurosystem also publishes disclosures for the corporate bond holdings held for monetary policy operations under the corporate sector purchase programme (CSPP) and the pandemic emergency purchase programme (PEPP). The scope and content of future disclosures will be reviewed and improved over time.

Q3 What methodology is used for the disclosures?

The Eurosystem disclosure framework has been developed collectively by the Eurosystem members and focuses on non-monetary policy portfolios. The framework considers the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), the Partnership for Carbon Accounting Financials, and the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), which all provide widely used and accepted standards for sustainability reporting. The framework has been adapted to fit the characteristics of Eurosystem portfolios. The reports provide further details on the methodologies applied.

Q4 How does the reporting methodology for corporate bond holdings under CSPP and PEPP compare with that for non-monetary policy portfolios?

To a large extent, disclosures on corporate bond holdings under the CSPP and PEPP follow the same methodology as that used for non-monetary policy portfolios under the Eurosystem disclosure framework. Any methodological differences reflect the monetary policy nature of the CSPP and PEPP portfolios and the ongoing integration of climate change considerations into the Eurosystem’s monetary policy framework. For example, CSPP and PEPP disclosures rely on emissions data reported by issuers only, while disclosures on non-monetary policy portfolios may additionally rely on estimated emissions data from climate data providers where reported emissions data are unavailable.

Q5 What data do you use for your calculations?

The Eurosystem relies on climate data from two specialised providers: Institutional Shareholder Services (ISS) and Carbon4 Finance (C4F). Both providers were selected in a Eurosystem-wide procurement process led by the Deutsche Bundesbank that considered data quality, data coverage and cost-benefit aspects. In addition to ISS and C4F data, Eurosystem members may also choose to complement their disclosures with data from other climate data providers individually available to them. Financial data are gathered from various Eurosystem internal and external public and non-public data sources. The natural delay with which climate data and financial data are released results in a reference year mismatch between the most recent holdings data and historical climate and financial data. To correct this mismatch, Eurosystem members may choose to retroactively update metrics for past holdings in future TCFD reports.

Q6 Why do you use weighted average carbon intensity, total carbon emissions and the carbon footprint as metrics for disclosure?

The weighted average carbon intensity (WACI), total carbon emissions and carbon footprint are the three key metrics used in the Eurosystem disclosure framework. They are all recommended for asset owners by the TCFD. Normalised metrics (such as the WACI and carbon footprint), and absolute metrics (such as total carbon emissions) complement each other and in combination provide a high degree of transparency regarding portfolios’ climate impact and exposure to climate risks. They benefit from a standardised methodology and are widely used in climate-related reporting across the financial sector. Eurosystem members may choose to also report other metrics to further enhance transparency.

Q7 Why do you disclose long-term targets?

Targets are an integral element of the TCFD recommendations under the category “Metrics and Targets” and are an important part of climate-related financial disclosures. Targets help to reduce a portfolio’s exposure to climate-related risks and to manage climate-related opportunities and the climate impact of asset holdings. All Eurosystem members strive to align their euro-denominated non-monetary policy portfolios and their corporate bond holdings under CSPP and PEPP with the objectives of the Paris Agreement and the EU’s climate neutrality objectives. In this context, it should be noted that each Eurosystem member remains solely responsible for all aspects related to the management of its non-monetary policy portfolios. This includes the preparation of the climate-related financial disclosures and the definition of targets.

Q8 Will you further develop interim and quantitative targets?

The TCFD recommends providing quantified and measurable targets where possible, including interim ones. At this stage, Eurosystem members may choose to rely on a qualitative long-term target, considering the specific objectives for and constraints on the Eurosystem’s portfolios, the ongoing development of net-zero investment frameworks for central banks, their recent but increasing experience with newly procured data sources and quickly evolving climate science. Eurosystem members will regularly review the disclosure practices and may choose to add interim and quantitative targets as appropriate.

Q9 What are the goals of the Paris Agreement and the EU’s climate neutrality objectives?

The Paris Agreement sets out a global framework to limit global warming to well below 2°C, and preferably to 1.5°C, compared with pre-industrial levels. In accordance with its commitment to the goals of the Paris Agreement, the EU aims to be climate-neutral by 2050. To this end, the EU adopted the European Climate Law, which sets a legally binding target of net zero greenhouse gas emissions by 2050 for the EU as a whole. The law also sets the interim target of reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. We strive to align our non-monetary policy portfolios and corporate bond holdings with the objectives of the Paris Agreement and the EU’s climate neutrality objectives and we will regularly monitor our progress towards achieving our climate goals.

Q10 Will you continue to publish regular disclosures?

The Eurosystem is committed to publishing these disclosures on an annual basis. In addition, the Eurosystem will regularly review all elements of the Eurosystem’s disclosure framework to further improve the quality of the disclosures and ensure that they are fit-for-purpose. Elements that will be subject to regular review include the scope of reported emissions, the portfolios included in the reporting, the reported metrics and targets, as well as data quality and availability.

Q11 Why does the Eurosystem perform a climate stress test of its balance sheet, and does it publish the results?

In 2022 the Eurosystem conducted a climate stress test on parts of its balance sheet to analyse the impact of climate change on its risk profile in accordance with recommended practice and as detailed on its climate roadmap. Such a stress test covers a range of financial exposures, including collateralised loans, corporate bond holdings, covered bonds and asset-backed securities.

The climate stress test is in line with the TCFD recommendation that organisations should describe their resilience to different climate scenarios in order to assess their potential implications. In addition, in its Guide on climate-related disclosure for central banks, the NGFS encourages central banks to disclose the direct and indirect impact of climate-related risk based on quantitative methodologies such as scenario analysis, stress testing and reverse stress testing.

The Eurosystem published the key outcomes of its climate stress test in a report, which provided an aggregate and qualitative overview of the results owing to remaining data gaps and methodological limitations.