Sharon Donnery: Much done, much more to do – climate risks and the banking sector

Remarks by Ms Sharon Donnery, Deputy Governor of the Central Bank of Ireland, at the BPFI Retail Banking Conference 2023, Dublin, 12 June 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Check against delivery 

Good morning, I am delighted to be here. Thanks to Brian and the BPFI team for the invitation to speak to you and to José Manuel for his own interesting remarks.

I am here to talk about ESG integration in the banking sector which of course covers many dimensions across the environmental, social and governance spectrum.  A critical aspect of that integration is our collective response to climate change – something which is not just a risk for banks and their balance sheets, but an existential challenge facing us all. 

Climate and environmental risks will be much of my focus today recognising that these represent only part of the sustainability regulatory journey.  And while it is fair to say that governance in banking could be considered a more well-established pillar, more consideration is certainly needed on the social aspect.  

Before I turn to this, however, I would like to say a few words about the current risk environment.

Challenging and uncertain times

We published our first Financial Stability Review of 2023 last Wednesday, amidst what feels like particularly challenging and uncertain times.

High inflation persists, and is eroding real incomes. Interest rates have risen rapidly – and may stay elevated for longer. Global growth has slowed, and is subject to significant downside risks. And as recent market turbulence has shown, vulnerabilities remain in the global financial system.

In the face such challenges the Irish economy and financial sector has so far proven itself resilient.

Household incomes and employment remain a key source of strength.