EU banking supervisor The European Banking Authority (EBA) announced the release of a new ESG dashboard, containing key indicators enabling benchmarking and monitoring of climate-related risks in the EU and European Economic Area (EEA) banking sector.

Based on information disclosed by banks as part of their Pillar 3 ESG disclosures, the new dashboard covers climate risk from both a transition and physical perspective, with indicators showing levels of green financing, based on alignment with the EU Taxonomy, in addition to considering internal definitions of green finance used by institutions.

According to the EBA, the information provided through the new dashboard indicates that the EU banking sector may be facing significant exposure to climate-related transition risk, with the data finding that exposure by banks to corporates from sectors highly contributing to climate change is above 70% in most countries, and 61% overall as of June 2024. Notably, however, the average exposure declined from 64% at the end of 2023. The EBA said that the risk exposure may be significant “especially if companies are affected by policy measures related to sustainability objectives, if a need to invest in technological change arises, or are affected by changing consumer preferences.”

Physical risk exposure appears to be much lower for banks than transition risk, with the indicator an average share of exposures in areas subject to elevated physical risk below 30% in most countries.

The dashboard also found that the green asset ratio (GAR) remains low, with an average loan GAR across the EU/EEA of 6% as of mid-2024, although the EBA noted that this is partly “due to the fact that the economy is still under transition, with at this stage few activities being able to demonstrate alignment with the Taxonomy criteria.” Notably, loan GAR climbed to 6% from 5.8% at the end of 2023.

The EBA said that it will regularly update and evolve the dashboard’s indicators over time. Click here to access the EBA’s ESG dashboard.