/>iIt has been publicly reported that the European Central Bank is planning to impose financial penalties (albeit modest ones) on certain banks that have failed to adequately prepare for climate change. Specifically, the European Central Bank has identified “nine outlier banks” which did not “adequately manage [climate] risks,” and are therefore subject to the potential imposition of fines. Notably, these banks include a major French bank that is the third-largest in Europe--so the European Central Bank appears willing to act even against major players in the financial industry.
In contrast, U.S. bank regulators, including the Federal Reserve, have been de-emphasizing the risk of climate change since the advent of the second Trump Administration. This divergence is simply another instance of the increasingly different approach towards ESG regulations, particularly concerning climate, between the European Union and the United States.
The fines against banks would be the first from the ECB over climate and would mark an escalation of its long-running efforts. The financial penalties themselves would likely be small, with [a major French bank] probably facing no more than €7 million ($8.1 million) ... The ECB has steadily ratcheted up its demands for how banks adapt their approach to risk-management to prepare for the fallout from climate change. Key risks that the ECB is monitoring include the financial impacts of extreme weather events on physical assets and supply chains, as well as the likelihood that high-carbon companies will lose value over time. ... The ECB stands out among major central banks for its willingness to deploy its toolbox to address climate risk. ... [T]he Federal Reserve has made clear it doesn’t consider climate a supervisory priority.
