The indicators, the ECB points out, are a first step to help reduce the climate change data gap, which is crucial for further progress towards a climate-neutral economy. The ECB indicators on climate risks refer to three thematic areas: sustainable finance, transition risks and physical risks related to climate change.

• The experimental indicators on sustainable finance provide an overview of debt instruments labelled as ‘green’, ‘social’, ‘sustainability’ or ‘sustainability-related’ by the issuer, issued or held in the euro area.   The data show that the volume of sustainable and green bonds has more than doubled in the last two years and has grown much faster than the overall euro area bond market.   Besides increasing transparency, these indicators also help to monitor progress in the transition to a zero-emission economy.   However, the lack of harmonised and internationally accepted standards on what defines a green or sustainable bond makes the data less reliable overall.

• Analytical indicators on carbon dioxide emissions provide information on intermediaries’ exposure to transition risks.   Preliminary results show that in the euro area, the majority of issues financed through equities or bonds are held by investment funds.   However, the data suggest that the most carbon-intensive activities are financed by the banking sector, as the financed companies produce relatively more emissions in their business operations to achieve a certain level of revenue.

• Analytical indicators on physical climate-related risks analyse the impact of natural hazards, such as floods, fires or hurricanes, on the performance of loan, bond and equity portfolios.   Although the risk of hurricanes largely influences financial portfolios in the euro area, the risk of this hazard causing severe damage is rather low.   In contrast, flooding is limited to coastal and river areas, but the level of damage and losses is estimated to be higher.