• The EBA found EU and EEA banks' transition and physical climate risk exposures remained broadly stable during the second half of 2025
• Banks' exposure to climate-sensitive sectors remained unchanged at around 62%
• Climate-related data quality improved, particularly for mortgage energy performance information
• Physical climate risk continued to vary significantly between jurisdictions
• The findings support stronger climate risk monitoring as ESG supervision expands across Europe
• The EBA continues embedding climate risk into prudential supervision through updated guidelines and enhanced disclosures



European banks maintained broadly stable climate risk exposures during the second half of 2025, according to the latest Environmental, Social and Governance (ESG) risk dashboard published by the European Banking Authority (EBA).

The report revealed that regulators highlighted an upward trend of gradual improvements in the quality of climate-related data despite persistent differences across jurisdictions.

The findings suggest that while banks continue to carry significant exposure to climate-sensitive sectors, their overall transition and physical climate risk profiles remained largely unchanged between June and December 2025.

The EBA said the results point to a banking sector that is steadily improving its ability to measure and monitor climate risk rather than experiencing material shifts in underlying exposures.

One of the most closely watched indicators showed that banks' exposure to sectors contributing significantly to climate change remained stable at 62% across the EU and European Economic Area.

Although individual countries experienced modest changes, the EBA said the institutions and jurisdictions with the highest transition risk exposures remained broadly consistent throughout the reporting period.

The stability suggests banks have yet to make significant changes to the composition of lending portfolios in climate-sensitive industries, reinforcing the importance of continued monitoring as financial institutions work toward longer-term transition objectives.

Regulators have increasingly emphasized that understanding transition risk is becoming a core component of prudential risk management rather than a standalone sustainability exercise.

The report also identified encouraging progress in the quality of climate-related information underpinning banks' risk assessments.

Mortgage portfolios continued to show gradual improvements in energy performance reporting, with a slight increase in highly energy-efficient exposures and a corresponding decline in mortgages lacking energy performance information or relying on estimated energy ratings.

Those improvements strengthen banks' ability to assess climate-related risks more accurately, particularly as supervisory expectations increasingly focus on the quality and completeness of environmental data.

Better information should also improve institutions' ability to identify potential vulnerabilities linked to property collateral and support more robust stress testing over time.

Physical climate risk indicators likewise remained largely stable across the region, although the EBA noted substantial variation between jurisdictions.

In some countries, average exposure to physical climate risk remained below 10%, while in others it exceeded 55%.

According to the regulator, those differences reflect a combination of geographic, economic and sector-specific characteristics, together with variations in how institutions classify and assess climate risks.

The findings illustrate the continuing complexity of developing consistent climate risk methodologies across a diverse European banking market.

The latest dashboard forms part of the EBA's broader effort to integrate climate considerations into prudential supervision.

Earlier this year, the authority finalized guidelines requiring banks to strengthen the identification, measurement, management and monitoring of ESG risks, while also developing supervisory expectations around climate scenario analysis and transition planning.

Together, those initiatives are intended to improve the resilience of European banks as climate-related financial risks become more material over the coming decades.

The dashboard itself has also become an increasingly important supervisory tool.

Based on banks' Pillar 3 ESG disclosures, it provides regulators and market participants with comparable indicators covering both transition and physical climate risks.

The EBA said the publication supports ongoing monitoring of emerging vulnerabilities while helping authorities assess how climate-related financial risks are evolving across the banking sector.

From 2026, the dashboard has also been integrated into the European Data Access Portal, improving transparency and accessibility for supervisory users.

While the latest results indicate little overall movement in climate-related exposures, the continued improvement in reporting quality suggests banks are becoming better equipped to understand and manage those risks.

As European supervisory expectations continue to evolve, institutions are likely to face increasing pressure not only to improve climate data further but also to demonstrate how that information influences strategic decision-making, capital planning and long-term risk management.