Banka Slovenije action to limit climate change and its impact

Climate change and environmental degradation pose a risk to the economy and to the financial sector. Banka Slovenije is therefore analysing and assessing the economic impact and the risks in connection with climate change, as they affect price stability and financial stability. Our aim is to effectively manage and mitigate climate-related financial risks during the pursuit of all of our activities, and to ensure as a supervisory authority that banks are identifying and managing climate-related and environmental risks. Through our actions and our measures we strive for the transparent disclosure of risks of this kind in the financial system.

Although governments and legislators have the primary responsibility for speeding up and supporting the green transition, within its mandate Banka Slovenije is committed to playing its full part in limiting the impact of climate change, and in meeting the goals of the Paris Agreement.

Banka Slovenije’s strategy for 2021–2026 sets itself the strategic guideline of being sustainability-focused. We are playing an active part in developing and realising supervisory methodologies and practices for climate-related and environmental risks. Because climate change has become an integral component of the financial and economic environment, we analyse its impact and the impact of related measures on macroeconomic developments. In line with the Eurosystem’s climate action plan, we are discussing measures to incorporate climate change into the framework for monetary policy implementation. We are promoting the incorporation of climate-related and environmental risks into risk management frameworks and decision-making processes through dialogue with credit institutions. We are strengthening the skills of our employees in addressing the impact of climate change. We also take full account of sustainability targets in the management of our own financial assets and our own operations.

Banka Slovenije has drawn up its Climate plan for 2024–2026, which encompasses the activities that we are focusing on with the aim of meeting the strategic guideline in the area of climate change and environmental protection, and is based on five pillars:

  • the resilience of the banking system;
  • macroeconomic analysis and monetary policy;
  • statistical data and indicators;
  • asset management;
  • our own carbon footprint.

The first pillar means that we are helping to ensure the banking system’s increased resilience to the financial risks inherent in climate change and environmental degradation. The key is the timely identification, adequate assessment and diligent management of climate-related and environmental risks at banks. We are also committed to developing and upgrading our own capacity to monitor the aforementioned risks in the banking system, with the aim of reducing the potential adverse impact on financial stability.

The second pillar means that we are incorporating the effects of climate change and the green transition into our regular analysis of the macroeconomic and financial environment and of monetary policy transmission. We regularly inform the public of the findings of the analysis, and take the results into account in our work and our policymaking. In addition, within the framework of our mandate and provided that it does not act counter to the basic objective of price stability, in the Eurosystem we endeavour to address aspects of climate change in our monetary policy implementation. This reduces the financial risks on the Eurosystem balance sheet, while we are using certain measures such as climate-related data disclosures to encourage best practice and to maximise transparency in this area.

Reliable data and indicators are a significant factor in decision-making. The data related to climate change is extremely diverse. It ranges from general statistics at national level, to specific data on individual financial instruments. Banka Slovenije uses this data in various areas, from formulating macroeconomic models for analysing the risks inherent in exposure to climate factors, to conducting macroprudential supervision of legal entities and managing our own asset portfolio. Well-organised and transparent data about the current values of and trends in various factors affecting climate change are therefore the foundation of high-quality analysis.

Banka Slovenije has extensive holdings of financial assets, which we manage in a way that in addition to pursuing the objective of strengthening our capital also improves the social responsibility and sustainability indicators over the medium term. Over the medium term we focus on reducing the carbon footprint of our holdings in private-sector issuers, and on further increasing our holdings of green, social and sustainable bonds. Over the long term we will strive to align our own portfolio of financial assets as far as possible with the principle of net zero greenhouse gas emissions.

We also work to reduce our own adverse impact on the environment. We aim to introduce an approach to working that makes us efficient and sustainable over the medium term, while minimising our impact on the environment. We are taking action in the areas of direct and indirect greenhouse gas emissions, and encouraging our employees to act sustainably, thereby reducing our own carbon footprint. The focus is on setting and meeting environmental targets that will drive us in the direction of net zero over the long term.

The key to successfully realising all these activities is employee engagement, and Banka Slovenije therefore relies on education to ensure that sustainability is valued by its employees, and is at the heart of its operations.

Our actions contribute to the general understanding of the risks and opportunities presented by climate change. We are also working to raise the quality and transparency of information in this area. We share our expertise with others, and thus encourage action on a wider basis.

A review of the activities under each pillar is presented in the table here.