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In its introduction to the interview, the newspaper refers to and quotes from speeches of September 2023 and November 2023 as well as from the interview itself, ending with references to the sanctions that the ECB can impose and the fit and proper requirements for bankers.
Coming from a supervisor charged with assessing bankers, those words sound quite threatening. What happens if the ECB finds a banker inadequate on climate?
We obviously have the advantage of being able to inspect the inner workings of all banks. And we see that a lot is going well at banks in the area of climate risks, even if no single bank has currently met all of our expectations. But I don’t see any bank completely ignoring climate risks either. Should this happen in the future, a moment would come where we would have to ask ourselves whether the people at the helm are still fit for their task.
How do banks endanger the economy by underestimating climate change?
Through credit risks, for example. When banks lend funds to the agricultural sector, where climate change leads to lower revenues, then the risk heightens that those loans are not repaid. Or take mortgages: if banks finance houses on sites that are increasingly prone to flooding, credit risk will rise too.
There is also a transition risk, in other words, governments can set rules to counter climate change. In the Netherlands, for example, you can only let out office buildings that have energy label C or higher. Imagine if a bank has lent funds to a business letting out offices without a valid energy label – that would again exacerbate the credit risk. Or what if cars running on diesel were no longer allowed in Amsterdam? If companies don’t prepare for this in good time, their investors will also become vulnerable.
And there is also a legal side, Elderson adds. The Dutch environmental organisation Milieudefensie has brought ING before the court on the grounds that the bank has made itself complicit in the climate crisis through its multi-billion loans to polluters. Through those loans, ING is emitting the same amount of greenhouse gases as all ten million Swedish citizens collectively, Milieudefensie claims. Elderson: ‘We have been reminding banks already for years that it is crucial for them to properly identify the legal risks too and control them'.