Sustainability

Research and modelling toolkit

The modelling toolkit was further enhanced to analyse the effectiveness of various policies in delivering the green transition. A study was conducted on inequality of opportunities, or how childhood living conditions influence income levels in adulthood. A series of articles covering a broad spectrum of sustainability-related topics were published.

Macroprudential supervision

Latvijas Banka released an explanatory article outlining the implementation of its decision to ease credit standards for loans aimed at financing the purchase of energy-efficient housing.

Financial stability analysis, including stress testing, scenarios and models

An analysis was conducted to examine the correlation between the renovation activity of multi-apartment buildings and the income levels of residents across Latvia's cities, parishes, and Riga neighbourhoods.

Supervision of financial market participants

Latvijas Banka maintained its involvement in the DG REFORM TSI project on environmental, social, and governance (ESG) risk management in the financial sector. As part of the project, Latvia's ESG regulatory framework for the financial sector received a positive assessment, confirming its alignment with EU requirements. Recommendations were also provided to enhance the supervision of ESG risk management. Latvijas Banka shared its expertise with other EU supervisory authorities regarding the application of energy efficiency data in the banking sector.

Annual questionnaires were administered to monitor the compliance of financial market participants' activities. Drawing from prior experience and ongoing dialogue with market participants, the content and questions of the questionnaire were refined.

The sectors of insurance, pension management, investment fund and alternative investment fund managers, as well as investment firms underwent a thematic review focused on sustainability-related disclosures. The key challenges identified in the review included adding the newly required volume of information to websites, ensuring that disclosures are presented in simple, concise language, and adhering to a consistent approach. Following the conclusion of the review, experience-sharing sessions were held with market participants. The integration of sustainability considerations into the supervisory review and assessment process 

(SREP) for credit institutions progressed further. The SREP business model methodology for less significant credit institutions was revised through the integration of a dedicated sub-module addressing climate risk. The assessment is carried out to a high standard, and where appropriate, qualitative requirements or recommendations are issued to market participants to improve their sustainability risk management process.

The Sustainability Breakfast events continued their role in raising awareness among financial market participants. The events assessed the financial sector's progress in meeting supervisory expectations, while also addressing topics, such as the impact of natural disasters on Latvia's economy and the insurance sector, and the protection of Latvia's households through climate risk insurance.

Climate-related data and statistics

The ECB's data on sustainable securities were integrated with Latvia's existing information on individual securities issues and holdings. Efforts were also made to ensure that Latvijas Banka's experts have access to the data through a centralised repository within the Data Lake.

The calculation of financed carbon emissions by credit institutions was initiated, employing the following methodologies and data sources:

• the ECB's calculation method;
• data from Latvijas Banka's Credit Register on loans issued to legal persons, submitted to the ECB under the AnaCredit framework;
• data on individual securities issues and holdings transmitted to central securities databases.

This enabled Latvijas Banka to assess the quality of data on greenhouse gas emissions generated by major businesses and financed by credit institutions.

Cash and market infrastructure

The 1, 2, and 20 cent coins were exchanged between Latvijas Banka and the Central Bank of Ireland, resulting in significant savings of carbon emissions by reducing the need for new coin production.

Nine tonnes of finely shredded banknotes were handed over to AS Rīgas Siltums for incineration in high-efficiency cogeneration furnaces. This approach represents the most efficient disposal method currently available.

Innovative ideas for processing finely shredded banknotes into high value-added products were unveiled during the hackathon. Team "Pitch and Plane" was announced as the winner by the jury, receiving support to further develop their idea. The team developed a creative approach to transform shredded banknotes into interior components, panels, sound-absorbing panels, and furniture.

In cash-related procurements, Latvijas Banka assessed bidders' compliance with sustainability criteria, placing particular emphasis on the use of recyclable and compostable materials in the production and packaging of collector and circulation coins, the use of renewable energy sources, energy consumption reduction, and the ability to regulate equipment downtime parameters in the procurement of cash-processing equipment.

Investments

A second report on climate-related financial disclosures was published, in alignment with the Eurosystem's unified stance on climate-related disclosures.

The integration of sustainability strategies into investment portfolios was further advanced, encompassing the adaptation of portfolios to align with EU sustainability standards.

Social responsibility policy

As an employer, Latvijas Banka made continued strides in strengthening an inclusive working environment, for example, it:

• empowered employees with knowledge concerning the role of DEI in fostering a positive work environment;
• conducted in-depth discussions within the management team to define the organisation's DEI target, thereby enhancing more informed decision-making in the future;
• identified challenges associated with integrating the younger generation of employees, with the aim of positioning the organisation as an open and accessible employer for youth and improving intergenerational cooperation;
• incorporated DEI aspects into regular surveys on the work environment and organisational culture encouraging feedback. One key area for improvement identified by employees was the need for greater management support in fostering diversity and an inclusive working environment;
• implemented two efficient and cutting-edge personnel management systems, designed to ensure objective decision-making in staff selection;
• resumed onboarding training for new staff;
• conducted a comprehensive, anonymous, and voluntary survey on an inclusive work environment, providing the groundwork for establishing a dedicated working group and defining inclusivity principles in 2025.

Latvijas Banka undertook preparatory steps for the implementation of the EU Pay Transparency Directive, with the aim of ensuring transparency in wage setting, eliminating gender-based pay disparities, and promoting equal remuneration for work of equal or comparable value.

In 2023, Latvijas Banka made a significant leap in the Official Monetary and Financial Institutions Forum's (OMFIF) Gender Balance Index, advancing from 139th to 35th place. Meanwhile, in 2024, Latvijas Banka surged to an outstanding 2nd place in the OMFIF Gender Balance Index.

Latvijas Banka earned bronze status in the diversity assessment conducted under the Society Integration Foundation's employers' movement Power in Diversity!. This distinction is awarded in recognition of outstanding performance in implementing diversity principles and commitment to excellence in cultivating an inclusive work environment. As an employer, Latvijas Banka was also honoured with the "Family-friendly workplace" status.

Over the course of two years, Latvijas Banka's strengths and areas for improvement have remained unchanged: its strengths include clear tasks, feedback and evaluation, while the area for improvement is employee workload.

Knowledge enhancement and capacity

Employees enhanced their knowledge of sustainability by participating in initiatives, such as nature restoration activity Doing Good for Nature, the sustainable mobility challenge Walking Around the Globe, and the Don't Eat the Planet campaign. Additionally, employees engaged in educational seminars organised by Latvijas Banka and stayed informed through the regularly published newsletter Sustainability News.

Financial literacy and public awareness of sustainable finance were advanced through the addition of a dedicated sustainable finance section on Latvijas Banka's website naudasskola.lv, the publication of podcasts explaining key sustainable finance topics for the public, and the organisation of a unique debate in cooperation with the Stockholm School of Economics in Riga – entitled Green Arguments: Debating Sustainable Finance.