Executive Summary

This is the third report in which Banka Slovenije is publishing detailed climate-related information related to our own financial assets, based on a disclosure framework mutually agreed at the Eurosystem level. It represents our contribution towards increased transparency about climate-related risks and opportunities pertaining to our financial assets. In addition to being transparent, we also wish to continue to raise public awareness and understanding of climate risks and opportunities.

As in last year’s report, our disclosure framework continues to be broader than the one set at the Eurosystem level. The common framework continues to take into account recommendations of the IFRS Sustainability Disclosure Standards (IFRS SDS) of the International Sustainability Standards Board (ISSB) and those of the Partnership for Carbon Accounting Financials (PCAF), the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), and the EU Corporate Sustainability Reporting Directive (CSRD). Besides disclosing several backward-looking climate-related metrics of our financial assets, we continue to disclose certain forward-looking metrics and seven years of historical data. Moreover, we are disclosing information on all four elements recommended by the IFRS SDS, namely Governance, Strategy, Risk Management, and Metrics and Targets. This year we have included Scope 3 greenhouse gas emissions in calculations of backward-looking metrics for our non-sovereign investments as required by the CSRD.

We have continued working towards achieving our long-term climate-related target and two medium-term objectives. In line with the EU’s climate neutrality strategy supporting the Paris Agreement, we continue to follow our long-term climate-related target by striving to approach net-zero greenhouse gas emissions of our financial assets by 2050 as much as possible. Central banks are among the largest institutional investors. Therefore, it is important to include socially responsible objectives and sustainability-linked considerations in our investment framework.

We have further increased our exposure to green, social and sustainable bonds, which represents our first medium-term objective. In 2024, we increased our investments in such bonds by almost EUR 180 million to EUR 625 million, already reaching our first medium-term objective (at least EUR 600 million by the end of 2025). By increasing the exposure to green, social and sustainable bonds, we have continued to provide financing for projects that actively contribute to the decarbonization of the economy and to the general improvement of people’s socio-economic situation.

In line with our second medium-term objective, we have continued to reduce the carbon footprint of our investments in private sector issuers. We have reduced the carbon footprint of our non-financial corporate bond portfolio by continuing to use the exclusion criteria for eligible issuers in line with the EU Paris-aligned benchmark recommendations as much as possible. Moreover, in 2024, we started reducing the carbon footprint of our equity holdings by switching from global market capitalization-oriented exchange-traded funds (ETFs) to low-carbon ETFs. Through the implementation of carbon-reducing strategies, we have further reduced the weighted average carbon intensity of our non-financial corporate bond and equity portfolios by approximately 22% and 40%, respectively, compared to 2023. As a result, the weighted average carbon intensity of our non-financial corporate bond portfolio is approximately 60% lower than that of the benchmark index, while our equity portfolio's weighted average carbon intensity is about 40% lower. In the future, we plan to further decrease the carbon footprint of our non-financial corporate bond portfolio and our equity portfolio. Additionally, we also plan to decrease the carbon footprint of our other private sector investments.

Performing climate stress tests complements our risk management framework by including environmental factors in the process of risk identification and assessment for our financial assets. The results indicate that the incorporation of environmental factors leads to an increase in total risk level, reinforcing our commitment and ongoing efforts to reduce the carbon footprint of our own financial assets.

1Introduction

This is the third report in which Banka Slovenije is publishing detailed climate-related information related to our own financial assets, based on a disclosure framework mutually agreed at the Eurosystem level. Banka Slovenije follows the disclosure recommendations of the IFRS Sustainability Disclosure Standards (IFRS SDS) of the International Sustainability Standards Board (ISSB).[1] Banka Slovenije also takes into consideration recommendations of the Partnership for Carbon Accounting Financials (PCAF), the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), and the EU Corporate Sustainability Reporting Directive (CSRD).

As in last year’s report, we are disclosing climate-related information under all four IFRS SDS elements, namely Governance, Strategy, Risk management, and Metrics and Targets. In addition, we are disclosing several backward- and forward-looking climate-related metrics of our entire financial assets for the last seven years (see the “Metrics and Targets” section for further information).

This report covers Banka Slovenije’s own financial assets only. It does not cover information about its other financial asset portfolios, for example those related to monetary policy.

The aim of this report is to increase transparency regarding climate-related risks and opportunities related to our own financial assets. We plan to improve climate-related disclosures over time, in line with improving data quality. Through greater transparency of our own activities, we strive to contribute to the availability of climate data and a better overall understanding of climate risks and opportunities.

All figures used in this report are unaudited.

2Governance

Banka Slovenije has adopted an integrated approach to the governance of climate-related risks and opportunities. As a result, social responsibility factors and sustainability-related considerations are addressed within our existing governance framework related to the management of our own financial assets.

Our Governing Board is responsible for the adoption of high-level guidelines related to the management of our own financial assets, including those related to the currency and asset class structure. The structure of our own financial assets is determined on the basis of strategic asset allocation, taking into account all constraints by optimising the expected return, while keeping quantitatively expressed financial risks at an acceptable level. The strategic asset allocation is approved annually by the Governing Board at the proposal of the Investment Committee. The Governing Board is also responsible for setting the investment objective, i.e. strengthening Banka Slovenije’s capital over the medium term, thereby helping to ensure our financial independence in performing central banking tasks. While meeting this objective, we also strive for socially responsible and sustainable investing.

In oversight of the management of our own financial assets, including the oversight of climate-related risks and opportunities, Banka Slovenije’s Governing Board is supported by the Investment Committee, which continuously monitors the asset management process and meets, in principle, on a monthly basis. The Investment Committee is responsible for setting more specific asset management criteria. The Investment Committee reports to the Governing Board on a quarterly basis to ensure the monitoring of risks and returns, including those related to climate change.

Portfolio managers are responsible for managing the financial assets in accordance with guidelines and criteria adopted by the Governing Board and Investment Committee. Portfolio managers are also responsible for the implementation of investment management strategies incorporating sustainability considerations. Risk managers are responsible, inter alia, for monitoring, assessing and reporting the risks stemming from these financial assets, including, progressively, the risks related to climate change.

To effectively link, coordinate and steer the work in the area of climate change within Banka Slovenije, and to cooperate with other institutions in this area, we have set up a Committee for Climate Change and the Green Agenda. The committee is tasked with ensuring that climate change-related content relevant to the implementation of all Banka Slovenije’s tasks is addressed comprehensively and in line with our strategic goals.

We have taken an active role in various international groups dealing with climate change-related topics. In October 2020, we joined the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), which brings together numerous institutions, including central banks, other banking supervisors and international financial institutions.

3Strategy

Banka Slovenije is well aware of the importance of understanding, anticipating and adapting to the implications of climate change and of the impact of the transition towards a more sustainable economy on future economic and financial outcomes. In recent years, therefore, we have been continuously developing our socially responsible and sustainable investment framework, with the aim of actively contributing to the transition to a low-carbon economy.[2] Beyond adapting our own behaviour, we also wish to further raise public awareness and understanding regarding climate risks and opportunities. We are also striving to improve the quality and transparency of disclosed climate-related information.

In 2023, we adopted an overhauled socially responsible and sustainable investment framework. In line with the EU’s 2050 long-term strategy supporting the Paris Agreement, we have decided to contribute our share by striving to approach net zero greenhouse gas (GHG) emissions of our own financial assets as much as possible by 2050.

To achieve our long-term goal, we set two medium-term targets. First, we decided to increase our investments in green, social and sustainable bonds (together referred to as thematic bonds) to at least EUR 600 million by the end of 2025. At the end of 2024, our investments in thematic bonds already amounted to EUR 625 million, representing an increase of almost EUR 180 million compared to the end of 2023. By increasing our exposure to thematic bonds, we continued to provide financing for projects that actively contribute to the decarbonization of the economy and to the general improvement of people’s socio-economic situation.

Second, we plan to continue reducing the carbon footprint of our investments in the private sector issuers, i.e. corporate bonds (financial and non-financial), covered bonds and equities. In 2024, we further reduced the carbon footprint of our non-financial corporate bond portfolio by continuing to use the exclusion criteria for eligible issuers that are in line with the EU Paris-aligned benchmark recommendations as much as possible.[3] By following these exclusion criteria, we discontinued investing in carbon-intensive companies, while companies from the tobacco and weapons[4] sectors continued to be excluded. Additionally, we plan to fully divest of our investments in such issuers by the end of 2025. In 2024, we also started reducing the carbon footprint of our equity holdings by switching from global market capitalization-oriented ETFs to low-carbon ETFs. We plan to continue reducing the carbon footprint of our equity holdings in 2025.

In the following years, depending on the quality and availability of the data, we might also set carbon footprint-lowering strategies for our other private sector investments, i.e. financial corporate bonds and covered bonds. A detailed description of our long-term goal, medium-term targets and strategies can be found in the “Metrics and Targets” section.

4Risk Management

This section summarizes the integration of climate-related risk factors in our risk management framework, specifically how we identify, assess and manage climate-related risks pertaining to our own financial assets.

4.1Integration of climate-related risks into the risk management framework

Our own financial assets are exposed to climate-related risks, potentially leading to adverse financial outcomes in the event of a progressive change in risk factors or extreme climate shocks. We are gradually integrating climate-related risks into our own risk management process using a bottom-up approach, where climate risks do not form a separate new category but are rather an amplifying factor of existing financial risks, such as credit and market risk. Regarding climate-related risks, we distinguish between transition and physical risks. Transition risks concern the likelihood and impact of the economic consequences of the transition to a carbon-neutral economy. Physical risks, on the other hand, concern the likelihood and impact of severe weather events or natural disasters occurring as a consequence of climate change.

The identification and assessment phase captures climate risks based on their traditional reflection in asset prices, price volatilities and credit risk indicators such as the ratings of external credit rating agencies (CRAs). The credit ratings and research analyses of the three major CRAs (Moody’s, Standard & Poor’s and Fitch) represent the primary source for evaluation of the creditworthiness and eligibility of our investment portfolio. Accordingly, we continuously monitor the development of their methodologies as detailed in Section 4.2.

Financial risks are usually measured over shorter time horizons (e.g. one year), while the negative impacts of climate-related factors are expected to be realized in the coming decades. Realization of those risks and the severity of future disasters depend on the implementation of climate commitments to reduce emissions. To capture climate-related risks beyond those reflected in market and credit indicators, climate stress tests (CSTs) which incorporate forward-looking metrics (scenario projections) were added to the risk identification and assessment process, as further elaborated in Section 4.3.

To mitigate risks within our own financial assets, we apply eligibility criteria, credit risk assessment and various limits. As regards climate-specific measures, we regularly update the exclusion list of nonfinancial corporate issuers by following EU Paris-aligned benchmark recommendations as much as possible. Acquired experience and expertise, enhanced data quality, and the development of specific indicators regarding physical and transition risks allow us to further enhance our risk management framework with additional mitigation measures.

4.2Climate considerations of credit assessment sources

We aim to base our processes on rating sources that already incorporate climate aspects. The credit ratings and research analyses of the three major CRAs represent the primary source for evaluation of the creditworthiness of issuers and play a significant role in our risk management framework. We examined the methodological principles of how climate-related risks (as well as social and governance factors of ESG criteria) are integrated into CRAs’ credit rating processes and noted that CRAs have already taken important steps in systematic assessment and inclusion of climate factors into traditional credit ratings. The acquired knowledge is actively applied and further enhanced through a comprehensive understanding of the methodological approaches employed by other credit rating sources and data providers. We regularly monitor the evolution of CRAs’ methodologies and follow climate data disclosures both independently and as part of the Eurosystem. Increased availability and usability of these data could lead to gradual integration into our existing risk management process.

4.3Climate stress test of Banka Slovenije’s own financial assets

Following best practices of the Eurosystem, we conduct climate stress tests (CSTs) for part of our own financial assets, using the ECB methodology. The CSTs include three long-term and two short-term scenarios developed by the NGFS and the ECB. The long-term scenarios have a time horizon of 30 years and vary according to the success in pursuing the commitments of the Paris Agreement. The worst-case scenario, i.e. hot-house world (HHW), primarily emphasizes physical risks resulting from the rise of emission levels due to non-implementation of climate policies. The second scenario, i.e. disorderly transition, assumes a delayed response to climate change, resulting in higher transition costs. Both scenarios are compared to the baseline long-term scenario where the commitments of the Paris Agreement are immediately and thoroughly fulfilled. The other two short-term scenarios particularly highlight the impact of catastrophic floods or disorderly adjustments of the economy to climate change.

The unique aspect of the CST methodology lies in the granularity of the input data and the comprehensive modelling of the economic impacts of climate change. This is integrated through increased default rates of individual companies as well as widening of the credit spreads and interest rate shocks. For each scenario, a particular year is identified where the impact in terms of risk is most severe. Using the internal model for risk calculation, the distribution of losses is calculated and standard risk measures are derived therefrom.

The CST application for the case of our own financial assets includes the credit deterioration impact for the nonfinancial corporate part of assets only, while market shock is applied on the entire bond portfolio. For long-term scenarios, the risks are compared to the baseline scenario, for short-term scenarios to the risk of the current portfolio. For all scenarios, the resulting risks are higher, peaking in the floods scenario for the short-term and in the HHW for the long-term scenarios.

The materiality of environmental factors in total risks is not negligible, which supports our commitment to reduce the carbon footprint of our own investments. In addition, the CST complements the risk management framework in terms of addressing environmental risk and its assessment within our own investments.

5Metrics and Targets

This section presents Banka Slovenije’s disclosure of climate-related metrics and targets for our own financial assets, which amounted to approximately EUR 5.7 billion as of 31 December 2024. The calculations and disclosures follow the recommendations of the IFRS SDS, the PCAF and the CSRD as far as is possible.[5]

5.1Targets

Long-term target

Setting a long-term climate target, supplemented with one or more medium-term targets, is an essential step towards creating an efficient socially responsible and sustainable investment framework. These targets reflect our commitment to reduce our own financial assets’ exposure to climate-related risks and their carbon footprint.

The Paris climate agreement, ratified in 2016 by members of the UNFCCC,[6] sets out a global framework for combating climate change. The primary goal of the Paris Agreement is to keep the average global temperature rise in this century well below 2˚C above preindustrial levels and to pursue efforts to limit the temperature increase to 1.5˚C. Achieving this target requires significant reductions in GHG emissions globally. Climate experts, such as the IPCC,[7] estimate that countries should achieve net-zero GHG emissions by 2050 to achieve the goal.

In line with our long-term objective and the EU’s climate neutrality strategy supporting the Paris Agreement, we continue striving to approach net-zero GHG emissions of our own financial assets as much as possible by 2050.

Central banks are among the largest institutional investors. It is therefore important to have social responsibility factors and sustainability-linked considerations included in our investment framework, thus increasing the public awareness of the importance of reducing GHG emissions and setting ambitious environmental objectives.

Nevertheless, the primary responsibility for improving environmental standards and combating global warming to achieve net zero GHG emissions by 2050 lies with the fiscal authorities rather than with investors. In fact, the most effective and efficient incentive to reduce GHG emissions is setting a price for these emissions, by means either of a carbon tax or of a trading scheme encompassing all carbon emissions. The decarbonization of our own financial assets will also depend on the success in the reduction of GHG emissions by issuers within our investment universe. The higher the share of eligible issuers that reach their net-zero targets, the higher the probability that investors (including Banka Slovenije) will be able to meet their (or our) long-term targets (e.g. net zero GHG emissions by 2050).

Medium-term targets

To achieve our long-term target, we are following two medium-term objectives that need to be achieved by the end of 2025 at the latest. We have already achieved our first medium-term objective, as our investments in green, social and sustainable bonds now exceed the target amount of at least EUR 600 million. As part of our second medium-term objective, we will continue to reduce the carbon footprint of our investments in private sector issuers, i.e. financial and non-financial corporate bonds, covered bonds and equities.

Increasing our investments in green, social and sustainable bonds

In 2024, we increased our investments in green, social and sustainable bonds to EUR 625 million, representing an increase of almost EUR 180 million compared to the end of 2023. As a result, we have already achieved our first medium-term objective (at least EUR 600 million in such investments by the end of 2025).

By increasing the exposure to thematic bonds, we continued to provide financing for projects that actively contribute to the decarbonization of the economy and to the general improvement of people’s socio-economic situation.

Investing in green, social and sustainable bonds is and will continue to be applied across all fixed-income asset classes in which we invest, i.e. sovereign, sub-sovereign, supranational, agency and corporate bonds.

Reducing the carbon footprint of our investments in private sector issuers

We continue to reduce the carbon footprint of our own investments in private sector issuers. Already in 2023, we updated and considerably tightened the criteria for excluding companies from the list of eligible issuers by following EU Paris-aligned benchmark recommendations as far as possible, taking also into account data quality and availability. By following these recommendations, we have discontinued investing in carbon-intensive companies which earn more than (i) 10% of their revenue from fossil fuels in general, (ii) 1% of their revenue from coal operations, (iii) 10% of their revenue from oil operations, (iv) 50% of their revenue from natural gas operations, or (v) 50% of their revenue from the generation of electricity from fossil fuels with a GHG intensity above 100g CO2e/kWh. Additionally, we have discontinued investing in companies from carbon intensive sectors that do not report these data. Moreover, we have continued excluding companies from the tobacco and weapons sectors. In 2024, we also started reducing the carbon footprint of our equity holdings by switching from global market capitalization-oriented ETFs to low-carbon ETFs. Through the implementation of carbon-reducing strategies, we have further reduced the weighted average carbon intensity of our non-financial corporate bond and equity portfolios by approximately 22% and 40%, respectively, compared to 2023. As a result, the weighted average carbon intensity of our non-financial corporate bond portfolio is approximately 60% lower than that of the benchmark index, while our equity portfolio's weighted average carbon intensity is about 40% lower (euro investment-grade non-financial corporate bonds and global market capitalization-oriented equity index).

In the future, we also aim to introduce carbon footprint-lowering strategies for our investments in financial corporate bonds and covered bonds (e.g. the exclusion of inappropriate issuers and favouring issuers with lower GHG emission intensities and/or more ambitious climate targets). However, all future plans are highly dependent on the quality and availability of suitable climate data for these asset classes.

5.2Metrics

In line with last year’s report, we here disclose several backward- and forward-looking climate-related metrics of our entire financial assets. We are disclosing the following four backward-looking metrics: (i) weighted average carbon intensity (WACI), (ii) total carbon emissions (TCE), (iii) carbon footprint, and (iv) carbon intensity. In general, the higher (increasing) the value of the disclosed backward-looking metrics, the higher (deteriorating) the portfolios’ carbon footprint. We are also disclosing three forward-looking metrics, which are available only for private sector issuers: (i) GHG emission reduction targets, (ii) temperature score, and (iii) carbon risk rating. In general, the higher (increasing) the exposure to issuers committed to global climate and temperature goals, the higher (improving) the portfolios’ alignment with the climate goals of the Paris Agreement. Furthermore, the higher (increasing) the carbon risk rating, the higher (improving) the portfolios’ preparedness for the transition to the low-carbon economy. In addition to the above-mentioned backward- and forward-looking metrics, we are also disclosing the amounts of our investments in green, social and sustainable bonds. The various climate-related metrics provide an assessment from different but complementary perspectives on whether current and planned issuers’ GHG emissions are consistent with climate-related targets. A detailed description of all the disclosed metrics is presented in the Annex.

GHG emissions are measured and expressed in tons of CO2 equivalent[8] (tCO2e) and usually reported under three scopes (Scopes 1, 2 and 3), as defined by the most commonly used global standard, the GHG Protocol.[9] Our calculations of backward-looking metrics (WACI, TCE, carbon footprint and carbon intensity) were previously based on the sum of Scope 1 and Scope 2 GHG emissions. This year, we have included Scope 3 GHG emissions in calculations of backward-looking metrics for our non-sovereign investments (equities and supranational, agency, corporate and covered bonds), as required by the CSRD and to incentivize issuers and data providers to enhance Scope 3 emissions reporting. Nevertheless, the underlying issuers’ Scope 3 GHG emissions are partly self-reported by issuers and partly modelled by the data providers. Thus, these data remain subject to data quality issues that may limit their reliability and comparability over time, including (i) considerable estimation uncertainty, (ii) diverging estimates across different data providers, and (iii) methodological refinements. Additionally, the usage of these data is exposed to the risk of double counting of GHG emissions.

We performed calculations of climate-related metrics using data provided by two independent climate data providers – Institutional Shareholder Services Germany AG (ISS) and Carbon4 Finance (C4F). In addition, we also obtained certain data from the World Bank, the ECB and Bloomberg.

Banka Slovenije promotes transparent disclosures aimed at providing the most relevant and accurate information available. Thus, when performing calculations of selected climate-related metrics, we try to ensure on a best-effort basis that all data (portfolio data, GHG emissions data, financial data and other data) typically refer to the same reference year. However, since a large amount of data is available only with a certain time lag (e.g. GHG emissions data and certain financial data), inputs for metrics calculations (especially for the most recent year(s)) typically refer to slightly different reference years. Thus, due to recalculations of historical metrics using all the inputs for the same reference year, values of reported historical climate-related metrics in this year’s report may be somewhat different from those in previous reports, especially the values of metrics for 2023.

Table 2 shows climate-related metrics by asset class for our total financial assets as at year-end 2024 (historical data are presented in the Annex).

Table 2: Climate-related metrics for year-end 2024

Sources: ISS, C4F, World Bank, Bloomberg, ECB, BS calculations.

Notes: Portfolio size includes the market value of our total financial assets, excluding gold, cash and cash equivalents, as at 31 December 2024. The percentages in brackets below each metric’s value indicate data availability (data coverage), calculated as the percentage of investments (i.e. market value of investments / market value of portfolio) for which all required data (i.e. GHG emissions data and financial data) is available. GHG emission reduction targets shows the percentage of investments in issuers committed to global climate goals (issuers with “Ambitious target”, “Committed science-based target” (SBT) or “Approved SBT”). Share of green bonds / share of social and sustainable bonds shows the percentage of our green bond / social and sustainable bond investments (i) in our total financial assets, including gold, cash and cash equivalents, and (ii) in our total financial assets, excluding gold, cash and cash equivalents (in brackets).

The historical evolution and asset class breakdown of our total financial assets is shown in Figure 2. As at year-end 2024, the portfolio (excluding gold, cash and cash equivalents) was composed of corporate bonds (46%), sovereign bonds (21%), covered bonds (15%), equities (11%), and supranational and agency bonds (8%).

Figure 3 shows the historical evolution of the normalized climate-related metrics of our sovereign investments. In general, the normalized backward-looking metrics[10] of our sovereign investments improved (decreased) over the observed period (2018–2024), which could be mainly attributed to the reduction of GHG emissions by sovereign issuers in general. The backward-looking metrics remained relatively unchanged in 2024. The emissions intensities of selected countries are shown in Figure 4.

Figure 5 shows the historical evolution of the normalized climate-related metrics of our non-sovereign investments, while Figure 6 shows the sector contributions to WACI of our non-sovereign investments. Over the 2018–2024 period, all three normalized metrics (WACI, carbon footprint and carbon intensity) of our non-sovereign investments improved (decreased) significantly. In 2024, the improvement in normalized metrics was mainly a consequence of our continued adherence to the strict exclusion criteria for non-financial corporate bond issuers and to switching our equity holdings into low-carbon ETFs. By doing so, we further lowered the carbon footprint of our non-sovereign investments by roughly 23% in 2024 compared to 2023, while WACI was lowered by roughly 18%.

As in last year’s report, we are also disclosing several climate-related metrics that are available only for private sector issuers, i.e. equities, corporate bonds and covered bonds. These metrics are GHG emission reduction targets, temperature score and carbon risk rating. We also continue to disclose the amounts of our investments in green, social and sustainable bonds.

Based on the ISS’s GHG emission reduction targets data, Figure 7 gives an indication of how well our investments in private sector issuers (corporate bonds, covered bonds and equities) are aligned with global climate goals. The share of investments in issuers that have committed to achieving global climate goals has increased from 26% in 2018 to 68% in 2024 (in 2024, the share remained unchanged compared to 2023). The ISS considers issuers with “Ambitious target”, “Committed SBT”[11] and “Approved SBT” as those committed to global climate goals.

Based on the ISS’s temperature score, Figure 8 gives an indication of how well our investments in private sector issuers are aligned with global temperature goals. The share of investments in issuers with GHG emission targets that, according to the ISS, are aligned with the SDS in 2050[12] remained relatively stable (and at high levels) over the observed period (2018: 89%; 2024: 89%). In general, for an issuer to be labelled as aligned with the SDS in 2050, its temperature score must fall into the category of 1.5°C.

Based on the ISS’s carbon risk rating, Figure 9 gives an indication of how well private sector issuers are dealing with industry-specific climate risks in their own operations and in the supply chain. The share of investments in issuers categorized as either “Outperformers” or “Leaders” (carbon risk rating above 50) remained relatively unchanged (and at high levels) between 2018 and 2022. However, it has significantly decreased in the past two years, primarily due to the overall decrease of the carbon risk ratings of financial institutions. Carbon risk rating is measured on a scale of 0 (very poor performance) to 100 (excellent performance).

In the last seven years, we have significantly increased our investments in green, social and sustainable bonds. In 2018, our investments in such bonds stood at only EUR 32 million, representing less than 1% of our total financial assets (including gold, cash and cash equivalents). At the end of 2024, we owned EUR 625 million of green, social and sustainable bonds (Figure 10), representing around 11% of our own financial assets. In 2024, we increased our investments in green, social and sustainable bonds by almost EUR 180 million.

6Annex

6.1Climate-related metrics for total own financial assets (Scopes 1 and 2 GHG emissions)

Sources: ISS, C4F, World Bank, Bloomberg, ECB, BS calculations.

Notes: The portfolio size includes all financial assets (EUR and non-EUR denominated), excluding gold, cash and cash equivalents. The percentages in brackets below each metric’s value indicate data availability (data coverage), calculated as the percentage of investments (i.e. market value of investments / market value of portfolio) for which all required data (GHG emissions data and financial data) is available. Data for GHG emission reduction targets, temperature score and carbon risk rating is only available for corporate bonds, covered bonds and equities. GHG emission reduction targets shows the percentage of investments into issuers committed to global climate goals (issuers with “Ambitious target”, “Committed SBT” or “Approved SBT”). Share of green bonds / share of social and sustainable bonds shows the percentage of our green bond / social and sustainable bond investments (i) in our total financial assets, including gold, cash and cash equivalents, and (ii) in our total financial assets, excluding gold, cash and cash equivalents (in brackets).

6.2Climate-related metrics for own non-sovereign assets (Scopes 1, 2 and 3 GHG emissions)

Sources: ISS, C4F, World Bank, Bloomberg, ECB, BS calculations.

Note: The percentages in brackets indicate data availability (data coverage), calculated as the percentage of investments (i.e. market value of investments / market value of portfolio) for which all required data (GHG emissions data and financial data) is available.

6.3Description of climate-related metrics

Weighted average carbon intensity (WACI)

WACI measures a portfolio’s exposure to carbon-intensive issuers. It is expressed in tons of CO2 equivalent per EUR million of revenue (non-sovereign issuers) or per EUR million of PPP adjusted GDP / population (sovereign issuers; production or consumption calculation method respectively). Calculation of WACI is straightforward, with good data coverage and intuitive interpretation, and it has application across asset classes. On the other hand, it is sensitive to outliers.

Total carbon emissions (TCE)

TCE measures absolute GHG emissions associated with a portfolio. It is expressed in tons of CO2 equivalent. Although the metric is widely applied across the financial sector, its usefulness is limited for benchmarking and comparison with other portfolios, as the data are not normalized. In addition, it requires data on market capitalization / total capital structure (non-sovereign issuers) or PPP-adjusted GDP (sovereign issuers), which might not always be available.

Carbon footprint (CF)

Carbon footprint normalizes the TCE of a portfolio by its market value. It is expressed in tons of CO2 equivalent per EUR million invested. It allows for comparison across portfolios, regardless of portfolio size, and at different points in time. On the other hand, it requires data on market capitalization / total capital structure (non-sovereign issuers) or PPP-adjusted GDP (sovereign issuers), which might not always be available.

Carbon intensity (CI)

Carbon intensity measures the carbon efficiency of a portfolio. It is expressed in tons of CO2 equivalent per EUR million of revenue (non-sovereign issuers) or per EUR million of PPP-adjusted GDP / population (sovereign issuers; production or consumption calculation method respectively). Compared to carbon footprint, it is more complex, its interpretation is less intuitive and its communication could be less straightforward. However, it enables comparison across portfolios, regardless of portfolio size, and at different points in time.

GHG emission reduction targets

To transition to a low-carbon economy, companies need to commit to alignment with global climate goals and demonstrate future progress. In this regard, the ISS differentiates companies’ targets into “No target”, “Non-ambitious target”, “Ambitious target”, “Committed SBT” or “Approved SBT”, based on the existence and quality of GHG emission reduction targets. It takes into account both science-based targets (SBTs) and other targets set by the individual company.

Temperature score

Temperature score is a forward-looking metric, expressed in degrees Celsius, designed to show the temperature alignment of companies with global temperature goals. The ISS’s temperature score examines issuers’ GHG emissions over-/undershoot of the SDS pathway (aligned with the Paris Agreement). For example, a company aligned with the SDS pathway is also expected to have a temperature score of 1.5°C. However, due to the complexity and uncertainty of the analysis of temperature scores, these should be used with caution, since a single metric cannot explain the full dynamics of an issuer contribution to global temperature increase.

Carbon risk rating

Carbon risk rating is a forward-looking assessment that provides a metric to evaluate how well a company is prepared for the transition to the low-carbon economy. It assesses how a company is exposed to climate risks and opportunities and whether these are managed so as to seize opportunities and to avoid or mitigate risks. It is measured on a scale of 0 (very poor performance) to 100 (excellent performance). The ISS categorizes companies’ carbon-related performance into four groups, i.e. “Climate laggards” (0–24), “Climate medium performers” (25–49), “Climate outperformers” (50–74) and “Climate leaders” (75–100).

Exposure to green, social and sustainable bonds

Investing in green, social and sustainable bonds falls into the category of thematic investing. Green bonds are used to finance investments with a positive impact on the environment. Social bonds are used to finance investments with a positive impact on the socio-economic status of society. Sustainable bonds are used to finance investments with a positive impact on the environment or the socio-economic status of society. Classification of these bonds should be based on widely used standards, such as the Green/Social Bond Principles, the Sustainability Bond Guidelines, the Climate Bond Standard and the European Green Bond Standard.

Share of green bonds

In addition to showing our exposure to green, social and sustainable bonds, we are also disclosing our share of green bonds as a percentage of our total financial assets. We are disclosing two metrics, i.e. share of green bonds (i) in our total financial assets, including gold, cash and cash equivalents, and (ii) in our total financial assets, excluding gold, cash and cash equivalents.

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