speeches at the same time, we will continue to roll out other elements of our climate strategy. in the course of next year, we will conduct a supervisory stress test with a focus on c & e risks. in addition, we will carry out a full supervisory review of banks ’ practices for incorporating c & e risks into their risk frameworks, and gradually roll out a dedicated supervisory review and evaluation process methodology that will eventually influence banks ’ minimum capital requirements. but this is not the end game. gradually we will start treating climate - related risks like any other risk and include them in all relevant supervisory requirements. conclusion let me conclude. the final results of the ecb ’ s benchmarking of banks ’ disclosure and risk management practices for c & e risks suggest that, as things stand, european banks may be largely misaligned with the economic transition path towards carbon neutrality by 2050. the probability of them having to face sudden build - ups of prudential risks in the thirty years from now to the paris deadline is considerable. the safest way to mitigate this risk is for banks to step up their risk management capabilities and clearly map their transitioning strategy. banks should develop transition plans compatible with eu policies implementing the paris agreement that include concrete intermediate milestones from now until 2050, and disclose progress towards these goals on an annual basis. to support this effort, transition plans should become a legal requirement. the realities of the climate crisis are everywhere. on a macroeconomic level, there is no doubt that a combination of physical and transition risks has started to emerge. only by introducing mandatory transition plans can banks ’ lofty intentions for the next 30 years be turned into concrete actions now. such mandatory transition plans can help avert the tragedy of the horizon. but this next step in risk management needs to be taken today. we don ’ t have thirty years ; we don ’ t even have ten years. in the earth ’ s timescale, all we have between today and 2050 is a blink of an eye. 1 european commission ( 2021 ) strategy for financing the transition to a sustainable economy. 5 / 5 bis central bankers'speeches

the year 2050, but rather on the intermediate points in time : 2025, 2030, 2035, 2040. why? first, because detailed plans featuring milestones have been widely used by banks to manage other risks – a clear example of this is the crucial role that disposal plans for non - performing loans played in reducing the legacy asset burden in the european banking sector. and second, because our benchmarking shows that banks systematically fail to establish a clear link between their stated carbon emissions goals for 2050 and their concrete actions in the present and medium term. indeed, we see that some banks that declare carbon neutrality by 2050 have no strategy in place to reduce their exposures to carbon - intensive industries by 2030, nor have they made any progress in assessing their role in financing the transition of such companies. even if banks comply with our supervisory expectations for the management and disclosure of c & e risks, that does not automatically mean that they have a paris - compliant transition plan. this is why i believe that having in place a formal, legally binding requirement to adopt such transition plans will push banks to go beyond the mere point - in - time measurement of c & e risks and to embark on a thorough assessment of the structural changes that are likely to occur within 3 / 5 bis central bankers'speeches the industries they derive their business from. long - term planning such as that involved in transition planning is a novelty as far as the risk management practices of most european banks go. as such, some novel elements will need to be in place to, on the one hand, support banks ’ efforts, and on the other, allow for a robust challenging of these plans by competent authorities. there are two elements that i think are particularly crucial for this next stage for banking supervision. first, we will need to have in place science - based european transition scenarios. so far, we have been advising banks to refer to the international energy agency ’ s reference scenarios. but these are global scenarios and they do not reflect the ongoing developments within the european legal framework. instead, banks can rely on the work already developed in this realm by the network for greening the financial system ( ngfs ), which has been designing scenarios to assess the potential future impacts of climate risks under different climate policy actions. these scenarios are already a de facto international standard for central banks and supervisory authorities when performing climate stress test and scenario analysis. as suggested by the european commission ’ s new sustainable finance strategy, the ngfs