Banka Slovenije joins the Network for Greening the Financial System

Banka Slovenije has joined the Network for Greening the Financial System (NGFS). It was founded primarily for the purpose of deepening knowledge and encouraging best practice in the green economy and green finance. We took this decision because we are aware that climate risks are of growing importance when it comes to financial stability. In separate analysis Banka Slovenije finds the climate sensitivity of the credit portfolio of banks in Slovenia to be moderate.

More and more often now the financial system is encountering a new set of risks in connection with climate change. These are already being reflected in the increased costs of natural disasters, which entail increased physical risks to the financial system. In light of increasing environmental awareness, international institutions are launching initiatives to transition to a low-carbon economy (the European Green Deal, and the green commitment of the recovery fund), which also entails rising transition risks to the financial system.

At the same time these initiatives are creating numerous opportunities in the greening of the economy and the financial system. In light of the current crisis, initiatives of this sort will also provide new impetus for rebooting the economy.

The Network for Greening the Financial System was founded in 2017, for the purpose of deepening knowledge and encouraging best practice in the green economy and green finance. It also aimed to contribute to meeting the goals of the Paris Agreement, and to sustainable development in general. The network currently includes 75 central banks, and a number of international financial institutions in the role of observers. Banka Slovenije joined the network in October 2020.

Report on climate risks in Slovenia

Banka Slovenije has also drawn up a report on climate risks in Slovenia in 2020. In it we find that the main climate-sensitive sectors are manufacturing, electricity, transportation, construction and households.

The physical risks are of particular importance to insurance corporations, but in Slovenia they are relatively small and manageable for now. Premium and claims for weather-related loss events have increased in recent decades, but remain stable as a proportion of total claims. The transition risks inherent in the costs of the transition to a low-carbon economy affect a broad spectrum of stakeholders, and could therefore have a significant impact on bank performance.

The analysis also examines the climate sensitivity of the banks’ credit portfolio, which is assessed as moderate. The proportion of the banking system’s balance sheet accounted for by exposures to climate-sensitive sectors and segments is small to moderate. At the same time climate-sensitive sectors are better-performing overall than other sectors.

Report is available in Slovene only.