The European Central Bank concluded its Climate and Nature Plan 2024-2025 in January 2026, bringing to a close a structured two-year supervisory programme designed to raise the standard of climate and nature-related risk management across the banks it directly oversees through the Single Supervisory Mechanism. The ECB reported that supervised institutions are now better positioned to assess and manage both climate and nature risks than they were at the programme's outset, though the institution acknowledged that it had needed to issue binding supervisory decisions in a number of cases where progress was judged to be insufficient.
The plan encompassed the ECB's work across its dual role as monetary policy authority and banking supervisor, setting out milestones for banks to meet in how they identify, measure, report, and manage their exposure to physical climate risks — such as flooding, drought, and extreme weather — and transition climate risks arising from the shift to a lower-carbon economy, as well as the emerging category of nature-related financial risks linked to biodiversity loss and ecosystem degradation.
BINDING DECISIONS ISSUED WHERE NECESSARY
One of the more significant elements of the ECB's account of the concluded plan is the confirmation that it resorted to binding supervisory decisions in cases where banks failed to meet expected standards through voluntary improvement. This marks a discernible shift from the earlier phases of the ECB's climate supervisory engagement, when the emphasis was principally on guidance documents, thematic reviews, and the progressive setting of supervisory expectations, with formal enforcement held in reserve.
Binding supervisory decisions carry legal weight and can result in formal capital add-ons, qualitative requirements, or enforceable remediation programmes. The ECB's stated willingness to use them in the context of climate and nature risk management sends a clear signal to the institutions it supervises: the regulator regards inadequate management of these risks as a genuine prudential concern, not merely a disclosure or reputational issue. Banks that have not yet fully embedded climate risk into their governance, internal models, and credit risk frameworks should expect that gap to attract supervisory attention in the cycle ahead.
CLIMATE WORK TO CONTINUE IN 2026 AND BEYOND
The ECB has confirmed that climate-related activity will continue across all three of its main functional areas: monetary policy, where it has been adjusting its own portfolio and collateral framework; banking supervision, where the focus will shift to deepening integration of climate risk into the standard annual Supervisory Review and Evaluation Process; and macroprudential analysis, including the development of more sophisticated scenario analysis and system-wide climate stress-testing methodologies.
The conclusion of the 2024-2025 plan does not represent a reduction in the ECB's ambition or any relaxation of the pace of its supervisory demands on this topic. The intention is to move from a time-limited thematic programme to a permanent and durable embedding of climate and nature risk considerations within the mainstream supervisory framework, so that they are assessed as integral components of overall bank resilience rather than as a separate periodic exercise tied to a named plan. European banks should expect ongoing expectations around risk disclosure quality, management framework robustness, and strategic planning for the low-carbon transition to become a standard and recurring element of their regulatory relationship with Frankfurt throughout the supervisory cycles ahead.