unprecedented effort, also on our part, to understand more fully how far the 2 / 4 bis central bankers'speeches banks we supervise are exposed to these risks. it will also give us a clearer picture of their resilience on this front. the second of these initiatives is a comprehensive review of banks ’ practices related to strategy, governance and risk management – the thematic review on c & e risks, which is a key topic of the session today. two years after we launched the supervisory guide on c & e risks, we are conducting this thematic review to follow up on the self - assessment exercise conducted last year. our main goal will be to assess the evolution of the soundness, effectiveness and comprehensiveness of banks ’ c & e risk management practices, as well as their ability to steer their c & e risk strategies and risk profiles. do all banks ’ processes and analyses have visible consequences? does the way in which banks actually steer their balance sheets and risk profiles reflect the materiality of c & e risks? these will be some of the core questions of this review. as part of this exercise, we will monitor banks ’ alignment with the supervisory expectations set out in the guide, and encourage banks ’ progress towards the industry ’ s best practices. fortunately, those practices were identified across different european banks over the last two years. they show that some banks are already doing what we are asking. the ecb is doing its part by guiding banks in their climate journey, setting forth supervisory expectations and sharing updates on good practices in the industry. in light of the efforts banks have already made in devising their action plans, as well as all the information on this topic published to date – by both the ecb and several other public and private organisations we expect to see material progress in banks ’ implementation deadlines and concrete actions. as part of the thematic review, we will also be looking more closely at the risk management practices for environmental risks such as risks to biodiversity, water stress and pollution. all have similar features and warrant a coordinated approach. banks can make significant savings if, taking advantage of the momentum, they extend the range of their preparations to cover all these risks, and are thus ready for a new, more concrete, supervisory and regulatory environment. our benchmark from last year shows that, as of early 2021, very few banks were looking into environmental risks beyond climate. we have highlighted this gap to banks. this year, we will assess how banks are managing their exposures to environmental risks beyond

call for divesting from carbon - intensive activities or from geographical regions vulnerable to physical risk. rather, we are asking banks to fully grasp the physical and transition risks and to actively start managing them, with the aim of making their portfolios more resilient to c & e risks. not all sectors will decarbonise overnight. for example, the international energy agency ( iea ) scenarios show that certain sectors will continue to rely on carbon - intensive technologies for some time. we as prudential supervisors merely need banks to understand what the transition entails for their risk exposures to those sectors, and to reflect it in their overall risk management strategy. what we do not expect is an outright withdrawal from carbon - intensive industries, nor do we expect it to happen for every single sector or counterparty – but we do expect banks to harbour the capacity to manage the risks emerging from climate change. to draw a comparison with traditional risk exposures, we, as supervisors, would of course not expect banks to divest from all assets that entail credit risks, but we do insist that these risks are managed appropriately. c & e risks are to be managed just like any other risk ; and their sound management requires sound risk controls. this is precisely one of our focus areas in the upcoming thematic review on c & e risks. supervisory roadmap for c & e risks for several years, the ecb has identified banks ’ exposure to c & e risks as one of the main vulnerabilities in the european banking sector. assessing and helping banks address risks stemming from climate change and environmental degradation will be one of our supervisory priorities from now until 2024, albeit these risks have been on our minds for far longer. i remember giving my first speeches on this topic in late 2015 when still an executive board member of de nederlandsche bank. so, we have already come a long way and our supervision of c & e risks will now take more concrete form. the 2022 srep cycle will be marked by several key initiatives, which represent the next level of maturity for our supervision of c & e risks. the first of these initiatives was the climate risk stress test, launched in january and currently being conducted by a dedicated supervisory team. this stress test was designed, first and foremost, as a learning exercise – for supervisors, for banks, and for the financial industry as whole. we are adamant about the importance of raising awareness of c & e risks. and this stress test constitutes an