This chapter sets out the report’s objective, analytical approach and structure, and explains why risks stemming from financial institutions’ net-zero commitments are relevant for prudential supervision. Falling short of these commitments may expose institutions to legal and reputational risks, while misalignment with net-zero pathways may heighten credit, market and liquidity risks driven by transition pressures. The report adopts the supervisor’s lens and develops a monitoring methodology for DNB to assess climate‑related prudential risks.
Net‑Zero Commitments and Prudential Risks in the Dutch Financial Sector
Abstract
Assessing the risks that stem from financial institutions’ net-zero commitments is relevant for prudential supervision.
Falling short of net-zero commitments may expose financial institutions to legal and reputational risks, including potential litigation, loss of market confidence, and governance concerns, which may in turn affect financial soundness. Misalignment with net-zero pathways may also increase exposure to other prudential risks driven by climate‑related risk. For example, continued financing of carbon-intensive activities may heighten vulnerability to asset stranding, credit deterioration, market repricing or declining collateral values as policies, technologies and market preferences shift towards lower-emission alternatives.
This report aims to support the development of a supervisory framework to manage these risks for DNB, which may also be suitable for use by other European supervisors. To this end, it analyses in detail the reporting practices of financial institutions in the Netherlands and assesses the suitability of supervisory data and analyses that supervisors may build on. These disclosures provide insights into the metrics and indicators institutions use to manage climate‑related net zero transition risks, as well as for supervisors to assess them. The report focusses on financed emissions, i.e. the emissions that financial institutions finance through their lending, investment and underwriting activities, commonly referred to as Scope 3, category 15 emissions.
As outlined in the ECB Guide on climate‑related and environmental risks (ECB, 2020[1]) and DNB Guide to managing climate and nature‑related risks (DNB, 2025[2]), climate‑related and environmental risks should be assessed as drivers of traditional prudential risk categories.
Supervisors need information that enables them to evaluate whether institutions’ transition planning and actual progress align with their net-zero commitments. A lack of credible alignment may point to heightened transition risks. Such information is also relevant for investors, as it can help them price climate‑related risks in the equity and debt issued by financial institutions. While supervisors focus on macro- and micro-level financial stability, investors may pursue other objectives, such as identifying mispricing of securities. Similarly, the Network for Greening the Financial System (NGFS) notes that climate‑related targets in transition plans can inform micro-prudential supervision, while ineffective, ambiguous or weakly monitored targets may create financial, legal and reputational risks (NGFS, 2025[3]).
The report aims to support DNB in fulfilling its prudential risk mandate by identifying the information needed to assess whether financial institutions are making credible progress towards their net-zero commitments. It develops a monitoring methodology to assess progress towards net-zero commitments, as well as the prudential risks that may arise from not achieving them. In doing so, the report highlights potential supervisory blind spots arising from data gaps, incomplete reporting practices and limitations in data comparability and quality. These shortcomings may hamper effective prudential risk assessment.
The report does not assess whether the wider economy is likely to remain aligned with net-zero pathways, nor does it estimate the likelihood or materiality of potential risks arising from aggregate misalignment. Instead, the report focusses on how supervisors can assess risks that may arise when financial institutions’ activities or exposures are misaligned with their net-zero commitments.
The supervisory framework serves as guidance for quantitative and qualitative assessments, including governance and risk management practices. It is not intended to create binding supervisory expectations or formal guidelines.
The relevance of climate‑related risk assessment is reinforced by empirical evidence from the ECB. Banks with higher exposure to climate‑related transition risks face higher borrowing costs in interbank repo markets. Analysis by the ECB interprets part of this premium as compensation for higher perceived counterparty credit risk, with the effect becoming stronger during periods of financial stress. This suggests that climate transition risk can already affect banks’ funding conditions, rather than representing a purely forward-looking concern (ECB, 2025[4]).
1.2.1. Prudential risk-based assessment
The report adopts the supervisor’s lens, focussing on prudential risks stemming from potential misalignment with net-zero commitments. It does not assess whether financial institutions contribute adequately to broader sustainability-related goals, for instance as measured by the EU Taxonomy.
The prudential risks considered fall into two broad groups. First, legal and reputational risks may arise where institutions’ activities are perceived to be inconsistent with their public net-zero commitments, potentially resulting in litigation, regulatory action or loss of market confidence. Legal risk constitutes a form of operational risk, while reputational risk can act as a cross-cutting driver across prudential risk categories. Second, misalignment may indicate exposure to transition pressures – policy, technological and market shifts away from carbon-intensive activities, which can translate into credit, market and liquidity risk, for example through weakened repayment capacity of borrowers, repricing of assets or declining collateral values. Where these risk categories are discussed together in the following chapters, they are referred to collectively as “risks”. Figure 1.1 describes how transition risk may affect prudential risks, and Chapter 4 discusses these risk channels in detail.
Transition risk drivers may affect the real economy through asset devaluation, lower debt-servicing capacity and collateral marketability, and can transmit to the financial system through prudential risk channels
Source: Based on the NGFS report “Guide for Supervisors: Integrating climate-related and environmental risks into prudential supervision”.
1.2.2. What does meeting net-zero commitments entail?
The EU Green Deal, approved in 2020 and reflected in European Climate Law, and the Dutch Climate Act target a 55% net reduction of GHG emissions by 2030 compared to 1990 levels, and climate neutrality by 2050. The Dutch financial sector Climate Commitment, signed in 2019, was linked to the initial Dutch Climate Agreement, which targeted a 49% reduction of GHG emissions by 2030. In 2026, the EU further updated its ambition by setting a legally binding climate target of a 90% net GHG emissions reduction by 2040.
Fifty-seven Dutch banks, insurers, pension funds, asset managers and sector associations committed to supporting these objectives through the Dutch Financial Sector Climate Commitment, signed in 2019 (klimaatcommitment.nl, 2026[5]). At the time, the Dutch Climate Agreement targeted a 49% reduction of GHG emissions by 2030 compared to 1990 levels, before the national target was strengthened to 55%.
Assessing company-level emission reductions since 1990 faces several challenges, such as limited information on 1990 emission levels, varying base years in current corporate reporting, and the emergence and discontinuation of entity-level economic activities. Therefore, net-zero pathways are typically defined and assessed at the sectoral or regional level (ECB, 2024[6]; 2022[7]).
Science‑based net-zero pathways, such as the IEA Net-Zero Emissions scenario (NZE) for the energy sector, describe emissions-intensity pathways for economic sectors and regions. These pathways rely on physical alignment metrics, which express emissions per unit of physical activity, capacity or output, such as kgCO₂/m² in real estate. For each year, a pathway defines the emissions-intensity level consistent with reaching net zero by 2050. In the following chapters, these pathways are described as “physical emissions-intensity pathways”, using terminology similar to the ECB (2022[7]). Because this assessment refers to year-specific intensity levels rather than to reductions relative to a historical reference point, no base year is required: a company whose emissions intensity tracks a trajectory approaching net zero by 2050 is considered on a credible transition path, regardless of its starting point. Further, if all companies align with their respective sectoral physical emissions-intensity pathways, which ultimately converge to zero emissions (or near-zero in certain sectors), this implies absolute emissions reductions consistent with Paris Agreement objectives.
References
[2] DNB (2025), Guide to managing climate and nature-related risks, https://www.dnb.nl/media/fbjjzf1o/guide-to-managing-climate-and-nature-related-risks-update-september-2025.pdf.
[4] ECB (2025), Climate change, bank liquidity and systemic risk, https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3168~96a956a7fe.en.pdf.
[6] ECB (2024), Risks from misalignment of bank’s financing with the EU climate objectives, https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.bankingsectoralignmentreport202401~49c6513e71.en.pdf.
[7] ECB (2022), Good practices for climate-related and environmental risk management, https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.thematicreviewcercompendiumgoodpractices112022~b474fb8ed0.en.pdf.
[1] ECB (2020), Guide on climate-related and environmental risks, https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.202011finalguideonclimate-relatedandenvironmentalrisks~58213f6564.en.pdf.
[5] klimaatcommitment.nl (2026), klimaatcommitment.nl, https://klimaatcommitment.nl/about/.
[3] NGFS (2025), Target setting and Transition Plans, https://www.ngfs.net/en/publications-and-statistics/publications/ngfs-notes-relating-transition-plans-climate-target-setting-and-climate-scenario-analysis%3F.