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  • Limited data availability hinders banks’ climate finance and prudential supervision.
  • Small businesses often lack the awareness and information they need to understand the financial risks caused by climate change.
  • Massive investments, and hence long-term finance, are needed to decarbonise the electricity sector in Central, Eastern and South-Eastern Europe and improve energy efficiency in buildings, and banks will play a key role in this.
  • Foreign-owned local subsidiaries can be a catalyst in developing a sustainable financial market.

The European Investment Bank (EIB) today released the extensive research conducted by the Vienna Initiative working group on climate change and financial stability, entitled Greening the financial sector: A Central, Eastern and South-Eastern European perspective.

The report provides valuable insights and recommendations on navigating the complexities of climate-related risks and fostering sustainable financial practices across Central, Eastern, and South-Eastern Europe (CESEE).

The study highlights the significant impact of limited environmental, social and governance data availability in CESEE, which reduces banks' ability to effectively manage climate risks and undermines effective prudential supervision.

While large corporations within the European Union have successfully adapted to robust disclosure requirements and are meeting the increasing demands of environmental, social and governance standards, companies — especially microenterprises and small and medium-sized enterprises (SMEs), which are prevalent in the region — often lack the information and awareness needed to understand the climate and financial risks they face.

EIB Vice-President Ambroise Fayolle said: “The report underscores the critical role of the financial sector in driving the transition to a more sustainable economy and achieving the European Union’s green transition goals. Coordinated efforts to unlock the potential of sustainable finance in the CESEE region are crucial for driving sustainable development. As the EU climate bank, the EIB is fully committed to providing continued support to businesses and facilitating the transition to renewable resources.”

Foreign-owned local subsidiaries could act as catalysts in developing sustainable finance across CESEE, mirroring best practices from their home countries, provided that parent banks apply their risk management frameworks to these subsidiaries.

Moreover, the report addresses key regulatory and supervisory issues, highlighting the need for robust oversight and stress testing of banks' activities related to climate risks. The report also delves into the decarbonisation of industrial sectors and buildings, with a special focus on the electricity sector. It identifies investment barriers, regulatory complexities and financing opportunities for facilitating the green transition in CESEE. The share of renewables in electricity demand, for instance, is set to increase from around 30% today to 50% by 2030, and to 75-85% by 2050. CESEE countries need an estimated €8 billion of investment in low-carbon technologies per year by 2030.

"The report provides a roadmap for CESEE countries to align their financial sectors with sustainability principles,” added EIB Chief Economist Debora Revoltella. “Addressing data gaps across Europe is imperative to enhance comparability and effectively tackle challenges by developing the necessary capacities and financial strategies.”

More information is available here.

Background information

About the EIB

The European Investment Bank is the long-term lending institution of the European Union owned by its Member States. It provides finance and expertise for projects that contribute to EU objectives. The EIB Group works closely with public and private-sector partners to support sustainable investment, job creation, economic growth and innovation across Europe.

About the Vienna Initiative

The European Bank Coordination Vienna Initiative is a forum for decision-making and coordination that brings together public- and private-sector stakeholders of EU-based cross-border banks in Central, Eastern and South-Eastern Europe, including central banks and regulators, commercial banks and international financial institutions. The Vienna Initiative was launched in January 2009 at the height of the first wave of the global financial crisis. Thematic working groups were created within the Vienna Initiative to share knowledge and best practices. The working group on climate change and financial stability was set up in 2021 and operated through 2023, delivering a series of seminars and the report Greening the financial sector: A Central, Eastern and South-Eastern European perspective