Governance Briefing — October 17, 2024
The European Central Bank refreshed its climate risk expectations, demanding board-level accountability for scenario analysis, data, and risk appetite integration across euro-area banks.
Executive briefing: On 17 October 2024 the European Central Bank (ECB) published an addendum to its Guide on climate-related and environmental risks. Boards of significant institutions must prove end-to-end governance of climate risk data, scenario testing, and remuneration alignment ahead of the 2025 supervisory deadline.
Key governance signals
- Board oversight tests. Supervisors will challenge whether boards approve risk appetite metrics, receive decision-useful dashboards, and oversee model validation.
- Data governance. Banks must document data lineage, controls, and remediation plans for climate metrics feeding into ICAAP, stress testing, and disclosures.
- Remuneration linkage. The guide emphasises aligning senior executive incentives with climate risk management objectives.
Action checklist
- Map board reporting packs to ECB expectations, ensuring minutes capture challenge of scenario design and remediation progress.
- Strengthen data governance playbooks for climate metrics, integrating them with model risk and internal control frameworks.
- Review remuneration policies to confirm climate risk management objectives influence variable pay and performance scorecards.
Sources
- ECB press release on updated climate risk expectations
- ECB Guide on climate-related and environmental risks: 2024 addendum
Zeph Tech helps euro-area banks evidence board challenge on climate risks, data lineage controls, and remuneration alignment to satisfy ECB supervisors.