CBK supports the green agenda in the financial sector

The Acting Deputy Governor for Financial Supervision, Nexhat Kryeziu, participated the signing ceremony of the cooperation agreement between the International Finance Corporation (IFC) and the Association of Kosovo Banks for promoting Sustainable Financing and Environmental, Social and Governance Standards.

The assessment and management of financial risks arising from climate and environmental changes is one of the challenges facing supervisory and regulatory authorities, including the financial sector.

“The fact that we are gathered here to discuss the challenges of climate and environmental change together; regulators, banks and international organizations (such as the IFC), shows that this aspect is currently one of the most urgent and discussed issues at the policy-making level, globally. As you know, as part of the countries of the Western Balkans, Kosovo has adopted the Green Agenda for the Western Balkans at the Sofia Summit in November 2020, which is a comprehensive strategic roadmap related to climate change. This agenda shows the way towards new energy solutions, which implies increased investments in renewable resources, as well as sustainable environmental development.

The banking sector represents the main component of the financial system of Kosovo, where its impact on the economy of Kosovo is very significant. Simultaneously, given that banks are globally required to play an important role in the transition towards green economy, it is our duty as a regulatory authority to ensure that the banks under our supervision address these risks adequately and proactively. Consequently, we at the Central Bank are convinced that the financial sector of Kosovo in general, and the banking sector in particular, will have the capacity to absorb such reforms”, said Deputy Governor Kryeziu.

As part of the CBK’s commitment to integrate climate and environmental risks into supervisory practices, in cooperation with the World Bank, a strategy is being drafted, which will be finalized during this year, where recommendations and supervisory requirements for management of risks related to climate and environmental changes will be defined. The main elements of the 2024-2026 Strategy include actions such as:

• Preparation of a green table, where the indicators of the green economy will be evaluated in the economy of Kosovo and in the financial system,

• Issuing standards, which will describe the principles that the banking sector will have to implement during the identification, management, control and reporting of climate risks,

• Defining the reporting framework related to the reporting of banks’ exposure to climate and environmental risks,

• Implementation of the macroprudential stress test for the risks of climate change and

• Preparation of the methodology for the assessment of climate risks and their full integration in the supervisory activities of the CBK.

“Also, we have already applied to join the Greening of the Financial System Network, which is a network of 121 central banks and prestigious financial supervisory authorities that aims to accelerate the growth of green finance and develop recommendations for the role of central banks on climate change. We hope to soon become part of this prestigious network of central banks and financial supervisory authorities. Monitoring and managing climate and environmental risks represents a long journey towards a new and complex topic for all of us. However, by engaging and working together, we will overcome these challenges more easily and deal with climate and environmental changes in time”, said Deputy Governor Kryeziu, promising that the CBK will be a partner in the realization of this transition.