DNB expects that banks understand the potential impact of climate-related risks on their balance sheets. Any material climate-related risk should be governed in a way consistent with sound risk management similar to any other type of material risk. DNB’s interpretation of how existing regulation applies to climate-related risk management is detailed in the Q&A.
DNB has assessed existing practices in the Dutch banking sector related to the management of climate-related risks. This Good Practice document aims to share some of the good practices that were observed by DNB, with the intention to inform the sector as a whole. These good practices provide non-binding guidance on how banks can organise their processes and procedures to manage the climate-related risks related to their activities.
Climate change poses new challenges to the risk management of banks. Both physical and transition risks can be characterised by significant uncertainty and nonlinearity, while their probability of occurrence may not be reflected in historical data. These challenges thus warrant timely and concerted actions by banks, but also by the wider private and public sector.