Source: Reuters

A sense of urgency is needed to plug data gaps in how banks in the European Union disclose their green credentials, the bloc’s banking watchdog said on Friday.

The European Banking Authority in March set out how banks would have to publish a groundbreaking “green asset ratio” or GAR as a core measure of how business activities are climate-friendly, as defined in the “taxonomy” compiled by the bloc.

GAR measures the ratio of climate-friendly assets like loans and debt securities to total assets on a bank’s books.

THe EBA said on Friday that based on a pilot exercise, its first estimate of the GAR currently stands at 7.9% on an aggregated basis for EU lenders, indicating a long journey to get closer to 100%.

It is based on a sample of 29 banks from 10 EU states, representing half of the EU banking sector’s total assets, and looking at their corporate exposures.

“The findings give a clear picture of banks’ data gaps and highlight the sense of urgency to remedy them if they are to achieve a meaningful and smooth transition to a low-carbon economy,” EBA said in a statement.

“The findings also show big differences in banks’ application of the EU taxonomy.”