Deputy Governor Fusha at the Interinstitutional Workshop on ESG Standards: CBK is committed to adapting an appropriate regulatory framework and strengthening capacities related to the assessment and management of climate and ESG risks to the financial system

Deputy Governor Mr. Dardan Fusha, together with the CBK staff dedicated to monitoring developments in the field of ESG and climate risks, participated in the workshop organized by the Kosovo Banking Association (KBA) in cooperation with the International Finance Corporation (IFC) regarding opportunities for adapting guidelines to address climate risks and the ESG criteria and risks for the banking sector.

In his opening remarks, Deputy Governor Fusha emphasized that the CBK is committed to advancing the regulatory framework and strengthening capacities to adequately identify, report, monitor, and manage risks related to the environment and climate change.

He presented the CBK’s latest developments on climate and ESG risks, including:
• Membership of the Sustainable Banking and Finance Network (SBFN) on 15 December 2023, which provides access to advanced information and training to support capacity building and adaptation of necessary regulatory instruments for the financial sector related to climate risks and ESG standards;
• Membership of the Sustainable Banking and Finance Network (SBFN) on 15 December 2023, which provides access to advanced information and training to support capacity building and adaptation of necessary regulatory instruments for the financial sector related to climate risks and ESG standards;
• Issue Guidance on banks’ reporting of credit exposures to companies exposed to transition costs related to the implementation of the Carbon Border Adjustment Mechanism (CBAM), requiring the collection of necessary data on these risks and their potential impact on banks, on 3 April 2024;
• Ongoing cooperation with FinSAC (part of the World Bank) in the preparation of the Climate Change and Environmental Risk Strategy in line with the CBK’s Strategic Plan 2024-2028, and the drafting of the Advisory Letter as guidance for banks on climate and environmental risks;
• Advancement of CBK’s investment policies in line with sustainable financing criteria; and
• CBK’s engagement in financial sector support and capacity building through participation in conferences, workshops and forums aimed at enhancing expertise and knowledge on climate risks, while supporting other relevant institutions in defining the national strategy at the country level.

Deputy Governor Fusha highlighted that based on these developments’ banks are expected to accurately assess the impact of climate and environmental risks on the business environment in which they operate and to integrate these risk assessments into their business and development plans. This means considering climate and environmental risks in the development of the bank’s overall strategy, objectives and risk management framework.

Banks are also expected to collect data reflecting their exposure to climate and environmental risks to enable their governing bodies to make informed decisions, and to disclose relevant information and key indicators relating to climate and environmental risks that they consider material.

All institutions also agreed on the need for greater focus and investment in capacity building and knowledge enhancement in this important area for the banking sector in particular, but also for the financial sector as a whole and other sectors at the national level.