speech urgent and vitally important : 2023 as a key milestone in stepping up the management of climate and environmental risks keynote speech by frank elderson, member of the executive board of the ecb and vice - chair of the supervisory board of the ecb, at the foreign bankers ’ association ( fba ) 30th anniversary amsterdam, 27 march 2023 thank you for inviting me to the fba ’ s 30th anniversary event. as i speak to you today, the global financial system is going through turbulent weeks. in the confluence of multiple challenges, often the very urgent trumps the similarly vitally important. it is tempting and frankly quite human to focus the attention on the most immediately pressing challenges. climate - related and environmental ( c & e ) financial risks might thus not seem the most obvious topic for a keynote speech at this moment. however, exactly one week ago the intergovernmental panel on climate change ( ipcc ) published its synthesis report, according to which temperatures have already risen to 1. 1 degrees celsius above pre - industrial levels. this worrisome observation reminds us that addressing the increasing risks from the ongoing climate and environment crises is both highly urgent and vitally important. this is the reason why in this keynote i want to stress that “ we have no time to lose regarding the sustainable transformation ” ; that we need to “ step up the global ambition to meet the paris agreement goals ” ; that our world needs “ more ambition to accelerate the change towards a net - zero economy ” ; and that “ financial institutions can and must play a key role in driving the world towards net - zero carbon emissions ”. i want to talk about the importance of “ aligning credit portfolios with the objectives of the paris agreement ” and “ managing climate - related risks as a priority action ”. these words don ’ t beat around the bush. these words express clear ambitions. these words cut to the heart of the matter. however, these words did not come from the ecb, the basel committee on banking supervision ( bcbs ) or the ipcc. these are your words. and by this, i mean literal quotes from the ceos of banks that have signed the net - zero banking alliance – a group committed to achieving net - zero emissions by 2050, in line with the paris agreement. most of these banks are also members of the fba. these words show that you want to play a pivotal role in the transition to net zero. these words articulate your ambition

to make climate - related and environmental considerations a key pillar of your strategy. in this keynote speech, i would like to give you an update on where banks under ecb supervision currently stand relative to their stated ambitions, and what still needs to be done to adequately address c & e risks from a prudential point of view. but first, a few words about regulators and supervisors. just as it is the case for banks, a broad global consensus has also emerged in our community on the need to make c & e considerations an integral part of our dna. evolving international supervisory consensus regarding c & e risks let me first very briefly revisit the simple guiding principle driving prudential regulators around the globe : ensuring that no material risks are left unaddressed. it is enshrined in the bcbs core principles and has been a legal requirement for decades. according to this principle, banks must identify and adequately manage the risks they are exposed to. just as for any other material source of risk, this also holds true for c & e risks. to be clear, it is not for us as supervisors to tell banks how green their lending policies must be. however, we insist that not taking into account the transition towards a more sustainable economy is no longer compatible with sound risk management. to this end, the ecb has strongly supported a rapidly growing global coalition in acknowledging that c & e risks form an integral part of our mandate. a key motivation to address this risk at the global level was to create a level playing field for banks to tackle what everyone agrees is a material source of financial risk. to ensure that european banks are indeed in a position to manage c & e risks, as early as in 2020 the ecb published a guide on c & e risks [ 1 ] for banks. the guide demonstrated the ecb ’ s commitment to making the financial system more resilient to these risks. it set out 13 supervisory expectations for how the banks under our supervision should integrate c & e risks into their business models and strategies, governance and risk appetite to increase the resilience of their portfolios. in doing so, we were moving very much in lockstep with the global principles for supervising c & e risks, building on the prevailing best practices identified by the global network of central banks and supervisors for greening the financial system ( ngfs ). during the two years following the publication of the ecb supervisory expectations, we conducted several supervisory exercises on banks ’ approaches to managing