What do (and should) we know about ESG profile of Italian bank borrowers?
Banks are called to an unprecedented effort to meet supervisory expectations regarding climate risk and other ESG profiles. The ECB’s 2022 thematic review has highlighted several weaknesses that must be swiftly overcome, and the SSM has asked individual banks to address a list of deficiencies and make use of some “good practices” that can already be found in the industry. The EBA has issued new standards concerning ESG information to be provided in Pillar 3 disclosures. These, and other, requests – while involving the re-design of a wide array of risk assessment and credit origination processes – also point to the need to acquire high-quality, granular information on the borrowers’ exposure to ESG risks, including physical and transition risk.
Banks will discuss the obstacles they are trying to overcome to get a better understanding of the risks underlying their loan portfolio (including for SMEs where climate-related data may prove hard to find); supervisors will comment on the state of the art and on possible ways forward.