Prudential net zero transition plans: the potential of a new regulatory instrument

Simon Dikau, Nick Robins, Agnieszka Smoleńska, Jens van’t Klooster () and Ulrich Volz
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Simon Dikau: Grantham Research Institute, London School of Economics
Nick Robins: Grantham Research Institute, London School of Economics
Agnieszka Smoleńska: Grantham Research Institute, London School of Economics
Jens van’t Klooster: Grantham Research Institute, London School of Economics
Ulrich Volz: Grantham Research Institute, London School of Economics

Journal of Banking Regulation, 2025, vol. 26, issue 1, No 6, 85-99

Abstract: Abstract Net zero transition plans are a promising additional instrument for prudential supervisors to assess, address and bring distant financial risks into the present. To date, transition plans have primarily emerged as non-financial disclosure requirement and as such, their prudential application has been limited. In this article, we discuss the role that transition plans can play as a new regulatory tool in banking supervision. The article outlines steps towards incorporating transition plans into prudential policy, thereby enabling supervisors to effectively use transition plans as a forward-looking instrument to better manage and overcome some of the challenges associated with climate transition risks.

Keywords: Sustainability transition; Climate-related risk; Banking supervision; Risk management; Macroprudential policy (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1057/s41261-024-00247-w

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