Устойчиво финансиране – рискове и отчетност в банковия сектор
Sustainable finance – risks and reporting in banking sector

Author(s): Boryana Borisova-Rossi
Subject(s): Economy, Financial Markets, Public Finances, Accounting - Business Administration
Published by: Международно висше бизнес училище
Keywords: sustainable; ESG risks; disclosure; banks
Summary/Abstract: In relation to the transition towards a sustainable, carbon-neutral, circular economy it is necessary to provide envisaged financial resources from the public funds as well as increase in private sector investments. Financial intermediation, in particular bank intermediation, plays a crucial role, while the transition leads to new risks which should be defined and appropriately managed in order to minimise threats to financial stability. Regarding sustainable financing the European Commission adopted a set of actions, summarised in a published plan and strategy. The action plan aims at reorienting capital flows towards a sustainable development, mainstreaming sustainability in risk management, fostering transparency and long-term orientation. In this context, the EC's efforts are focused on ten interrelated areas, with the building blocks of taxonomy, disclosure and other tools as benchmarks and standards. These legislative acts are the starting point for categorising banks’ products and exposures, as well as activities of the banks’ borrowers. Furthermore, they contribute to the development of unified reporting, as a basis for assessment and management of the climate change transition risk, part of the broader concept for environmental, social and governance (ESG) risks. Under the newly established European regulatory framework for sustainability disclosure, credit institutions should meet multiple reporting requirements. Banks must have an appropriate corporate governance and risk management structure and process in place to identify, measure, mitigate and report risks. Competent supervisory authorities are engaged in monitoring and analysing this information for the purposes of financial stability. This is why banks and supervisory authorities are facing the challenges related with accurate future reporting and measurement of ESG risks, given the lack of sufficient and comprehensive information.

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