The Bank of Spain reminds that the EBA will force financial institutions to assess the degree of environmental sustainability of companies before granting loans
The Bank of Spain reveals in its first economic bulletin of the year that the most polluting Spanish companies have seen their funding from banks decline since the signing of the Paris Agreements in 2014 to 2019, the last year of analysis.
For example, the article “Climate Risk and Credit Supply in Spain” published this Tuesday by the regulator details that the share of funding allocated to sectors classified as the most polluting has been reduced from 47% in 2014 to 43% in 2019. , together before the pandemic broke out. Conversely, the credit balance allocated to the less polluting sectors of Spanish business has gained weight over the years, from 53% in 2014 to 57% in 2019. It should also be taken into account that the most polluting sectors, according to the agency’s data has, on average, greater and worse financial ratios than those of the less polluting sectors.
In addition, the Bank of Spain explains that the data shows that the banks most exposed to climate risk would have reduced the supply of credit to companies operating in the most polluting sectors during that period in order to reduce this risk. Although, he assures, these effects are “quantitatively moderate”. In concrete terms, a bank whose exposure to CO2 emissions is in the 75th percentile would have reduced the supply of credit to polluting companies on average by 2,884 euros per year from 2014 to 2019 compared to that for less polluting companies. That size is moderate if one considers that the outstanding credit balance of an average company at a certain bank is 160,000 euros, the regulator reports.
In this regard, the organization recalls that the EBA (European Banking Authority) will force financial institutions to assess the degree of environmental sustainability of companies before they can provide loans. In addition, in 2022 the EBA published the ESG risk disclosure standards, which require credit institutions to publish comparable information about the risks associated with climate change and the impact on their balance sheets. The information considered includes the ‘Green Asset Ratio’, which identifies the weight of green assets on the total balance sheet of credit institutions. All this with the aim of promoting a greater respect of companies for the environment, but also to contribute to channeling investments to the most sustainable sectors and sectors that need resources.
Source: La Verdad
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