Cyprus banks among lowest in EU for climate risk exposure

Cypriot banks’ exposure to climate-sensitive sectors remains below the European average, ranking among the lowest in the bloc, according to the latest European Banking Authority (EBA) ESG risk dashboard published this week.

Data covering the second quarter of 2025 showed that banks in Cyprus recorded exposure of 59 per cent to non-financial corporations operating in sectors that significantly contribute to climate change, the eighth lowest rate in the EU and below the European average of around 62 per cent.

The EBA said the latest update confirmed continued stability across key climate-related risk indicators, broadly in line with previous releases, while providing authorities and institutions with background information to manage environmental risks.

Within Cypriot banks’ portfolios, the largest concentration related to real estate activities (16.7 per cent), followed by retail and wholesale trade and vehicle repair (16.4 per cent), industry (11.1 per cent), transport and storage (9 per cent) and construction (7.5 per cent).

Across Europe, exposures remained elevated due to the weight of climate-sensitive industries in corporate lending portfolios.

The highest levels were recorded in Denmark (81 per cent), Finland (80 per cent), Estonia (79 per cent), Norway (79 per cent), Austria (78 per cent), Bulgaria (78 per cent), Latvia (77 per cent) and Italy (76 per cent).

At the other end of the scale, Luxembourg (13 per cent), Slovakia (27 per cent) and Malta (41 per cent) reported the lowest exposure levels.

Separately, the European Central Bank (ECB) recently fined Credit Agricole €7.6 million for failing to comply with supervisory decisions on climate and environmental risks.

The report also showed improving environmental data quality. Real-estate-backed exposures recorded stronger energy-performance information, while banks’ reliance on proxy indicators declined by around 10 percentage points since December 2023, indicating better coverage and more reliable sustainability assessments.

However, measurements of physical climate risk remained uneven across jurisdictions, reflecting methodological differences and the complexity of assessing environmental risks across diverse geographies.