The European Central Bank (ECB) unveiled a series of deadlines today for banks to deal with climate and environmental risks, with full alignment with expectations to identify and manage risks required by the end of 2024.

The new deadlines were unveiled with the release of the results of the ECB’s thematic review into banks’ strategies and their governance and risk management frameworks, examining whether banks adequately identify and manage climate risks as well as environmental risks such as biodiversity loss. The review covered 186 banks, including “significant banks” under direct ECB supervision and “less significant banks” supervised by national authorities.

The review revealed that while many banks have put basic practices in place, 85% lack sophisticated methodologies and granular information on climate and environmental risks, and that banks significantly underestimate the breadth and magnitude of these risks, with 96% having “blind spots” in identifying them.

Following the review, the ECB said that it has set institution-specific deadlines aimed at achieving full alignment with its supervisory expectations, which it outlined in its 2020 “Guide on climate-related and environmental risks.” The ECB also laid out a set of minimum milestones for all banks to reach, including expectations to have in place comprehensive materiality assessment of the impact of climate and environmental risks on their activities by March 2023, the inclusion of climate and environmental risks in their governance, strategy and risk management by the end of 2023, and meeting all remaining expectations, including having climate and environmental risks integrated into stress testing frameworks, by the end of 2024.

The ECB said that it will closely monitor the deadlines, and warned that enforcement action will be taken if necessary.