On 16 July 2021, the Dutch Central Bank (De Nederlandsche Bank, DNB) published a consultation version of a good practices and Q&A document on the integration of climate-related and environmental risks in the risk management of investment firms and (managers of) investment funds (the Good Practices Document).
According to DNB, climate-related and environmental risks can have a material financial impact on the solidity and reputation of Dutch investment firms and managers of investment funds (both alternative investment funds and units for collective investment in transferable securities). Therefore, DNB expects that these financial undertakings understand and control these risks. On the basis of existing prudential rules and regulations, these financial undertakings need to take into account relevant material risks in their strategy, business model, governance and risk management, which (now) also includes climate-related and environmental risks. In the Q&A included in the Good Practices Document DNB among other things explains how existing rules and regulations apply in relation to controlling these risks.
DNB also notes that at the regulator’s request 22 investment firms/investment funds included climate-related and environmental risks in their Internal Capital Adequacy Assessment Process submissions for 2019 and 2020. The Good Practices Document contains a number of good practices in this regard, which should help financial undertakings understand how these types of risks can be integrated in their strategy, business model, governance, risk management and information provision.
Chapter 1 of the Good Practice Document sets out how climate-related and environmental risks can translate into conventional financial risks (e.g. market and operational risks). Chapter 2 addresses relevant applicable rules and regulations and chapter 3 contains the good practices.
Feedback on the consultation version of the Good Practices Document can be submitted to DNB via email until 10 September 2021.