Sinéad Gibney (Dublin Rathdown, Social Democrats)
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223. To ask the Minister for Finance whether his Department has raised any concerns around the high level of fossil fuel financing which comes through Ireland, its potential impact on Ireland's climate targets and global decarbonisation efforts; and if he will make a statement on the matter. [40638/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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In regard to financial services firms involvement in supporting fossil fuel investments in Ireland, I would respond by saying that addressing climate risks and supporting the transition to a carbon-neutral economy is a key part of financial regulation: the Central Bank of Ireland’s Strategy for 2025-27 sets this out clearly.

Within the Bank, a climate change unit was operationalised at end-2021 to further the Central Bank’s work on embedding climate risk and sustainable finance considerations into the day-to-day activities of the Central Bank.

With regard to the investment needed to achieve climate targets, these are significant; the cost for the EU of meeting our European Green Deal climate targets by 2030, in particular reducing emissions by 55% with respect to 1990 levels, is estimated to be around €400 billion annually (2¾ percent of EU 27 GDP). To fund the climate transition, while achieving strong, sustainable, resilient, and inclusive growth, the EU and its Member States must work together to mobilise private investment.

To this end to help the financial system support investment in sustainable activities, there have been significant changes to legislative framework, the EU Sustainable Finance Action Plan seeks to ensure the financial system can help support a sustainable economy. The development of the Sustainable Finance Disclosures Regulation (SFDR) (for funds, life insurance and pensions sectors), sectoral amendments at investment level for investment firms (MiFID), funds, and life insurance investment advisors, as well as the Taxonomy Regulation and the EU Green Bond Regulation have all brought sustainability and Environmental, Social and Governance (ESG) features into the disclosures space. Investors are now being provided with clear information on how sustainable their investments are.

More specifically, as a major funds jurisdiction, the Central Bank figures (for end February 2025) show that approximately €1.9 trillion of funds authorised in Ireland are made up of investments promoting a sustainable objective (Article 8 SFDR) or with a sustainable objective (Article 9 SFDR) - and this is approximately 37% of the total authorised Irish funds.

From a prudential perspective, the Central Bank has issued Guidance for (Re)insurance Undertakings on Climate Change Risk in March 2023, which provides expectations with regard to how firms consider climate change risks within their business. Noting the assessment of the materiality of a firm’s exposure to climate change risk, with reference to a defined ‘baseline’ climate change scenario, is key to understanding the potential impact of climate change on the sustainability of their business model.

For the banking sector, in January 2025, the European Banking Authority (EBA) published its Guidelines on the Management of ESG risks. The Guidelines set out requirements for banks for the identification, measurement, management and monitoring of ESG risks, including through plans aimed at ensuring their resilience in the short, medium and long term.

It should also be noted that both the EBA and the European Insurance and Occupational Pensions Authority (EIOPA) have been mandated by the European Commission to consider in respect of capital requirements for banks and insurers, the need for a “green supporting factor” (for exposures to green/sustainable economic activities) or “brown penalising factor” (for exposures to unsustainable activities such as fossil fuel activities).

The Central Bank has also considered the importance of transition planning for the financial sector and published an Information Note on this important issue recently.

Finally, it is important to note that while the EU and Ireland are on a path to net zero emission by 2050, at present our economies are still dependent on carbon emitting fuels.