Analysis of ESG disclosures in Pillar 3 reports. A text mining approach

Ángel Iván Moreno Bernal () and Teresa Caminero García ()
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Ángel Iván Moreno Bernal: Banco de España
Teresa Caminero García: Banco de España

No 2204, Occasional Papers from Banco de España

Abstract: Disclosure of prudential information on environmental, social and governance (ESG) risks will become mandatory from June, 2022 for large institutions with securities traded on a regulated market of any Member State. This paper tries to assess how prepared European financial institutions are for this requirement and applies text mining techniques to analyse the prudential reports, commonly referred to as Pillar 3 reports, for 2019 and 2020 of most of the significant banks under the ECB direct supervision in order to evaluate the level of awareness of these institutions in relation to the materiality of ESG risks. By applying a simple taxonomy of terms based on lexicons and regular expressions using a tool that we have developed, we are able to identify relevant excerpts with a high level of precision searching for different combinations of concepts within the taxonomy of terms. The results indicate that although there is an increased awareness of the ESG risks, with a significant increase in smaller institutions (those with less tan 30 billion in assets), the level of detail included is generally low and the introduction of the new ESG mandatory disclosures should have a significant impact on the level of disclosures in this area.

Keywords: ESG; environment; social; governance; sustainability; climate change; carbon emissions; environmental risks; physical risk; transition risk; natural language processing; Pillar 3 (search for similar items in EconPapers)
JEL-codes: C19 C81 G32 Q54 Q56 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2022-03
New Economics Papers: this item is included in nep-ene and nep-env
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:opaper:2204

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