The European Central Bank on Friday called on banks to improve their preparations for future environmental risks as it published the results of its first "climate stress test". 

Banks in the eurozone "must urgently step up efforts to measure and manage climate risk", the ECB's supervisory chief, Andrea Enria, said in a statement.

Launched in January, the stress test gauged the impact of different transition scenarios and "extreme weather events" on banks' business.

The exercise, in which 104 banks participated, showed that "around 60 per cent" did not have the necessary assessment frameworks and many "lack relevant data" to assess climate risks in their portfolio, the ECB said.

In the short term, 41 of the banks that provided projections faced around €70 billion in losses in a "disorderly" scenario, where the cost of carbon emissions rose quickly.

But the figure likely underestimated banks' exposure due to the "scarcity of data" and simplified modelling, the ECB said.

A more orderly transition led to lower losses for banks, the report concluded.

In all, "almost two-thirds of banks' income from non-financial corporate customers stems from greenhouse-gas-intensive industries", it said.

Almost two-thirds of banks' income from non-financial corporate customers stems from greenhouse-gas-intensive industries- Report of first ECB climate stress test of banks in eurozone

The conclusions of the stress test did not have any direct impact on banks' capital requirements.

The ECB expected banks to learn from the stress test and "take decisive action" to better prepare for future climate risks, said Frank Elderson, the vice-chair of the central bank's supervisory arm.

Earlier this week, the ECB unveiled plans to "decarbonise" its bond holdings and make its monetary policy more climate-friendly.

The steps by the ECB's governing council "aim to better take into account climate-related financial risk" and "support the green transition".