Europe’s Biggest Banks Face New Green Asset Ratio Disclosure

(Bloomberg) -- Europe's biggest banks face new rules to disclose how much of their business contributes to climate change.

The “Green Asset Ratio,” announced by the European Banking Authority on Monday, would be a key metric to show if a firm is shifting away from financing fossil fuels and toward renewable energy. The proposal to the European Commission would apply to big investment firms and banks including Deutsche Bank AG and BNP Paribas SA.

“A simple GAR metric is absolutely vital if we are to understand where we are today, from a green perspective, and to identify where we want to be,” said Piers Haben, director at the EBA.

If the rule is adopted, each bank would need to disclose how much of its total loans and equity holdings is “green,” based on EU definitions. Lenders would also need to report fee income derived from green business. European banks with operations in foreign countries would need to make their best effort to say how much of that business aligns with EU standards.

The move is part of the EU's broader efforts to meet the Paris accord objectives of keeping the temperature increase below 2 degrees celsius. The bloc's regulators are embedding environmental goals in standards for banks, money managers and insurers, to direct trillions of euros toward a greener economy.

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