Climate risks: Analysis of transition risks inherent in mortgage portfolios 2023

During 2023, FINMA addressed the issue of climate risks in the course of its supervisory exchanges with larger institutions and communicated its expectations with regard to the management of nature-related risks. In the banking sector, it also analysed mortgage products making references to sustainability.

FINMA collected data from 16 banks in categories 1 to 3 in order to perform an initial quantitative assessment of the climate-related transition risks inherent in their mortgage portfolios. This data collection covered 72% of the total mortgage loan volume of the Swiss banking sector. The data collected related to the overall energy efficiency and heating systems of the mortgage-financed buildings. An assessment was also made of the data sources relied upon and the quality of the data.

The results show that, of the financed buildings for which appropriate data was available, approximately 50% of the mortgage loan volume is linked to buildings with a medium to poor overall energy efficiency (Swiss Cantons’ Building Energy Certificate Label D to G or a comparable classification). Approximately two thirds of the mortgages serve to finance buildings heated with fossil fuels. In a future transition towards a climate-friendly economy, mortgage loans linked to those buildings may be exposed to transition risks, which could crystallise if, for example, new legislation were to be enacted.

FINMA also identified significant data gaps in relation to the features being surveyed. The majority of the banks are planning to further improve their data collection processes in that area. For its part, FINMA is consulting with other relevant authorities with a view to introducing measures aimed at improving the nationwide availability and quality of data in the building sector.

(From the Annual Report 2023)

Annual Report 2023

Updated: 20.03.2024 Size: 2.63  MB
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