European Central Bank faces pushback over climate risk disclosure

Europe’s biggest banks have a transparency problem with their central bank, and for once it’s not about interest rates. The European Central Bank’s new “climate factor,” which adjusts the collateral value of certain assets based on their exposure to low-carbon transition risks, has drawn pointed criticism from the banking sector for lacking disclosure on how those adjustments are actually calculated. The European Banking Federation, the continent’s main banking lobby, is pushing the ECB to reveal the full methodology behind the climate factor. The core complaint: banks are being told their collateral is worth less, but they can’t see the math that got them there. What the climate factor actually does The climate factor works like this: when banks post assets such as non-financial corporate bonds as collateral to borrow from the ECB, a discount (known as a “haircut”) is applied to account for various risks. The climate factor adds an additional layer to that haircut, reducing the collateral value of assets that carry higher exposure to transition risks. The initiative was first announced on July 29, 2025, and took effect for corporate bonds on June 15, 2026. The ECB plans to extend ...