Assessing climate and environmental risks in the financial sector and supervising the associated risk management


Climate change and the low-carbon transition have the potential to significantly impact the economy as a whole and the financial system and are thus a source of risks. In our role as a supervisory and macroprudential authority, we must ensure that the financial system is resilient to climate-related risks. 

We analyse climate and environmental risks to the Belgian financial sector and, through our publications, aim to encourage financial institutions to measure, assess and manage these risks and disclose information about them. In addition, we seek to promote the greening of the financial system. 

Furthermore, mainly in cooperation with a number of international working groups, we look at how the prudential regulatory framework may need to be adapted to ensure the public disclosure of information about climate risks and the inclusion of these risks in strategies, governance structures and risk management and, possibly, the adaptation of capital requirements. 

While our main focus is on climate-related risks, we also consider sustainability risks, including counterparty environmental, social and governance (ESG) risks.  

Like COVID-19, climate change can cause unexpected major shocks to the economy and financial stability. However, as a society, we can prepare for these consequences and take measures to limit the likelihood of a risk materialising, as well as the scope of its impact, and build up resilience to potential unexpected shocks. Even in the challenging circumstances of a worldwide health crisis, we should not lose sight of climate change as an urgent policy priority. The longer we wait to take concrete measures, the more stringent the measures will have to be to achieve the goal of reducing CO² emissions and the greater the transition risks will be.
Brenda Van Tendeloo —
Prudential Supervision and Financial Stability Analyst —

Since 2018, we have been studying climate-related risks to financial stability. We described these risks in our Financial Stability Report 2018 and our Financial Stability Report 2019. In late 2018, we surveyed financial institutions regarding the extent to which they take climate-related risks into account in their strategy and risk management. The results of this survey and our recommendations for the Belgian financial sector to assess, manage and disclose these risks are discussed in our Financial Stability Report 2019. 

Our Financial Stability Report 2020 includes a section on the transition risks associated with real estate exposures in the Belgian financial sector. We recommend that financial institutions analyse the extent to which the energy inefficiency of their real estate portfolio could impact current and future credit risks and take steps to manage and limit this type of transition risk. 

In a recent circular (NBB_2020_45), we set out our expectations in terms of the collection of data on residential mortgage loans, investment loans backed by real property and other commercial real estate exposures. We also request that information on property energy efficiency be reported for new residential mortgage loans. 

In itsGuide on climate-related and environmental risks, the ECB outlines its expectations of banks when it comes to the safe and prudent management of climate-related and environmental risks, in the current prudential framework, and the transparent disclosure thereof. These expectations are expected to have a major influence on the operational supervision of banks in the coming years. Banks were requested to submit in early 2021 information on how they planned to meet these expectations by the end of the year, so as to allow the risks to be included in the Supervisory Review and Evaluation Process (SREP) for 2022. 

The financial sector will be key in facilitating the transition to a sustainable economy but will also face significant risks. It will play a central role in ensuring that the necessary financial resources are mobilised, helping the economy to adapt and mitigating climate-related risks.
Jean Hilgers —
Director —

The NBB's commitment to the COP26 Goa

Following the 2021 UN Climate Change Conference (COP26), the NBB endorsed the commitment by the Network for Greening the Financial System (NGFS), of which the Bank is a member, to achieving the conference’s ambitions. In its own statement, the NBB described how, like the ECB, in its capacity as an independent institution and within the scope of its powers, it plans to contribute to decisive policy-making to enable achievement of the goals of the Paris Agreement and the transition to a green, low-carbon economy. 

We participate in various national and international working groups engaged in the development of methodologies and metrics to assess climate-related and environmental risks and in the examination of how to adapt the prudential regulatory framework to better take into account these risks. We actively contribute to publications issued by these working groups and forums. 

Network for Greening the Financial System (NGFS)


In 2018, the Bank became a member of this worldwide network that brings together central banks and supervisory authorities with the aim of helping to manage climate-related and environmental risks and green the financial sector at a faster pace. 

Established in 2017 by eight banks and supervisory authorities, the NGFS now has more than 70 members. Since its creation, the network has published many very usefuldocuments, such as guidelines for including climate-related and environmental risks in prudential supervision as well as a handbook and a series of reference scenarios for performing scenario analyses. 

Sustainable Insurance Forum (SIF) & International Association of Insurance Supervisors (IAIS)​

SIF Logo

The Sustainable Insurance Forum (SIF) is a worldwide network of insurance supervisory authorities and regulators tasked with looking at ways of dealing withthe sustainability challenges facing the insurance sector. Set up in December 2016, it offers its 30 members a platform for sharing knowledge, research and collective action. The Bank has been a member of the SIF since 2018.

The SIF works closely with the International Association of Insurance Supervisors (IAIS), which develops standards and other supporting materials for supervision ofthe insurance sector.

These two organisations have releaseda number of interesting publications, including the following:

Basel Committee on Banking Supervision (BCBS)

The Basel Committee on Banking Supervision, the primary global standard setter for the prudential regulation of banks, studies how supervisory authorities and banks can take into account climate-related and environmental risks and how regulations can be adapted to better consider these risks. 

Bank for International Settlements (BIS)

Bank for International Settlements

A bank for central banks, the Bank for International Settlements (BIS) aimsto promote international cooperation in the area of monetary and financial stability.

Relevant BIS publicationsinclude:

European Commission


At the European level, theEuropean Green Deal and the EU Action Plan on Sustainable Financeare veryimportant. Together with the Belgian Ministry of Finance (FPS Finance), the NBB is a member of the Member States Expert Group on Sustainable Finance, which coordinates sustainable finance initiatives at the EUand national levels and advisesthe European Commission on the implementation of EU legislation and policy on sustainable finance.

European Insurance and Occupational Pensions Authority (EIOPA)


TheEuropean Insurance and Occupational Pensions Authority (EIOPA)works on disclosure standards for insurance companies and the inclusion of ESG risks and scenario analyses in the risk management of insurance companies. EIOPA has published a consultation documenton the use of climate scenarios, carried out a stress test for company pensions in 2019, and is currently working on a scenario analysis for the insurance sector. 

More information on EIOPA and sustainable finance can be found at:  

European Banking Authority (EBA)


The European Banking Authority (EBA) issues disclosure standards for banks and investment companies. It has also published a consultation document on the management and supervision of ESG risks. In addition, it is currently working on a report on the possible adjustment of minimum capital requirements having regard toESG risks.

European Central Bank (ECB)

ECB Logo

At the end of 2020, the ECB published its Guide on Climate-Related and Environmental Risks, outlining its expectations for risk management and public disclosureby credit institutions. In addition, it has carried outa number of studies on how climate-related and environmental risks should be taken into account in the internal capital adequacy assessment process (ICAAP) and how information about such risks should be publicly disclosed. Together with the European Systemic Risk Board (ESRB), the ECB also develops risk indicators, methodologies and scenarios to assess the impact of climate-related risks on financial stability. In 2020, the ESRB published areport entitled “Positively green: Measuring climate change risks to financial stability, with someinitial results on the monitoring and assessment of climate-related risks, including a top-down stretch test.

Belgian Taskforce on Sustainable Finance

This working group brings together various federal and regional government services to exchange information and views on sustainable finance and provide input for Belgian positions on European sustainable finance legislation and policy.