Bank watchdog moves ahead with new ESG rule feared across Europe

illuminem summarizes for you the essential news of the day. Read the full piece on Bloomberg or enjoy below

🗞️ Driving the news: European banks are being urged to stop resisting new ESG reporting requirements and accept the upcoming implementation of the green asset ratio (GAR) rule
• The GAR rule requires mandatory disclosure of a bank’s green asset ratio to provide stakeholders with transparency about their sustainable financing activities

🔭 The context: The green asset ratio, supported by the European Central Bank (ECB) but criticized by the finance sector, reflects the percentage of a bank's balance sheet that adheres to the EU’s sustainable business activities criteria
• Some banks fear these ratios will be low, potentially casting them in a negative light while other banks, like DNB of Norway, have begun sharing their ratios.

🌍 Why it matters for the planet: The financial sector's transparency regarding sustainable investments is essential in the global fight against climate change
• As investor pressure mounts, the industry is urged to be proactive in assessing environmental risks and supporting climate-friendly policies

⏭️ What's next: With the mandatory disclosure of the green asset ratio set to commence from January, banks are making a last ditch attempt to align their portfolios with environmentally sustainable activities and prepare for rigorous data reporting
• The larger aim is to ensure banks adequately understand and respond to environmental and social risks

💬 One quote: "The exercise is necessary... it will trigger actions to get better information," (Jose Manuel Campa, Chairman of the ECB)

📈 One stat: Preliminary figures hint that the GAR will likely be in single digits for most banks

Click for more news covering the latest on sustainable finance