The international agenda in 2025 was largely dominated by geopolitical developments. From a long-term perspective, however, nature-related and climate-related risks remain a significant concern for the financial sector and require ongoing systematic assessment and mitigation. This is consistently reflected in the approach taken by the European Supervisory Authorities and the ECB and in the measures implemented to date, which underscore the need for preventive risk management in changing circumstances. Moreover, the reprioritisation does not diminish exposure to nature-related and climate-related risks. It often intensifies them – both physical and transition risks.

At the same time, sustainability is undergoing structural change. This has been demonstrated with even greater clarity: sustainability is no longer a stand-alone initiative, but rather a horizontal element to be integrated into organisational strategies. In a context of geopolitical fragmentation, organisations that embed sustainability principles in their business models in a timely manner gain a competitive advantage.

During the reporting year, Latvijas Banka continued to implement its internal sustainability objectives for the period up to 2026. Latvijas Banka's GHG emissions are decreasing, mainly due to the rising share of renewable energy sources in final energy consumption. The share of strategic (i.e. green, social, and innovative) procurements continues to increase, accounting for 58% of all procurements1A strategic procurement is a procurement that takes into account environmental and social impacts or promotes the development of innovation.
 in 2025 (compared to 2% in 2022). The carbon footprint of non-monetary policy investment portfolios is also declining. In the area of social sustainability, differences in pay between women and men for equal work were eliminated during the reporting year. The annual internal assessment found that the staff's daily green habits have remained stable and show a slight upward trend.

In 2025, Latvijas Banka continued to publish articles promoting a discussion on the sustainability and competitiveness of various sectors, assessing demand, supply, environmental and health impacts, circularity, and other aspects in areas such as transport, energy, trade, and land-use, land-use change, and forestry (LULUCF). Pollution caused by "forever chemicals" (PFAS), as well as textile and clothing production, changes in demand, and environmental and health impacts were addressed extensively, i.e. at global, European, and Latvian levels.

In the area of social sustainability, experts from Latvijas Banka evaluated the role of human capital and health care in improving well-being and quality of life, as well as tools for activating internal labour reserves. An assessment was provided regarding the fulfilment of the human capital objectives of the National Development Plan and the fairness of remuneration in Latvia, as well as the impact of gender roles on birth rates and gender inequality in the labour market.

Latvijas Banka's research on sustainability focuses on enhancing modelling tools for analysing the economic impact of the green transition. In 2025, models developed in previous years were used to assess the impact of the introduction of ETS2 on the economies of the euro area and Latvia. A study was also carried out on the impact of improved heating efficiency on real estate prices in Latvia. The results show that apartments in retrofitted buildings cost roughly 11% more than otherwise similar apartments in non-retrofitted buildings, and the return generated by renovations for apartment owners is about 10% of the apartment value.

Latvijas Banka has started to focus more on nature-related risks and is developing tools for their management. In the future, this risk category may affect a growing number of financial market participants. In parallel with regulatory simplification efforts at the European level, Latvijas Banka developed a draft IT solution during the reporting year to ease the collection and exchange of sustainability-related data among financial market participants, their customers, and Latvijas Banka.

Throughout 2025, Latvijas Banka played an active role in international forums and organisations dedicated to advancing the greening of the financial system, including:

  • the ECB working groups on climate change, organisational sustainability, sustainable and responsible investment in portfolios of financial assets, and statistics;
  • the EBA working group on sustainable finance;
  • the ESMA working groups on sustainability supervision, sustainability reporting, and regulation;
  • interinstitutional working groups;
  • the NGFS working groups on sustainable financial investment and corporate governance, climate scenarios, research, modelling, and biodiversity.

On 10 December 2025, the Latvian Corporate Governance Award was presented for the fifth time. The event honoured organisations that have demonstrated their excellence across the award categories and featured a discussion on the corporate supervisory board as a value-adding element of governance, as well as how effective board functioning contributes to organisational sustainability and development. The award aims to reinforce the practical application of the Latvian Corporate Governance Code and sustainability principles among Latvian companies.

Key milestones achieved in 2025

Research and modelling toolkit

In 2025, models developed in previous years were used to assess the impact of the introduction of ETS2 on the economies of the euro area and Latvia. A study was also carried out on the impact of improved heating efficiency on real estate prices in Latvia.

Analytics

Several articles covering a broad spectrum of sustainability-related topics were published. The article on transport sustainability compared public and private transport in terms of commuting time and emissions, and partially analysed transport usage patterns among the population. Articles were published on PFAS pollution, energy, trade, textile production, as well as on the role of the LULUCF sector in Latvia's climate policy – on GHG emissions removals and on the calculation methodology. Analytical articles were also published on the current problems of the Latvian building stock and building renovation issues. In the area of social sustainability, Latvijas Banka encouraged reflection and discussion on demographic challenges through an expert discussion on promoting birth rates in Latvia. Several analytical articles were also produced on this topic, including on the impact of gender roles on birth rates and gender inequalities in the labour market. The fulfilment of the human capital objectives established in the National Development Plan was assessed. The role of human capital and health care in improving well-being and quality of life, as well as tools for activating internal labour reserves were analysed. The fairness of remuneration in Latvia was assessed, including in comparison with other Baltic States.

Macroprudential supervision

The easing of lending standards for energy-efficient housing loans, launched in 2023, continued. The easing measures have been in place since 2024.

Financial stability analysis, including stress testing, scenarios, and models

An overview of how climate-related risks are reflected in the financial stability reports of several countries was prepared, leading to the following conclusions: the more timely and rapid the transition to climate neutrality, the lower the costs and losses associated with climate change in the long term. An article on the impact of natural disasters on the financial sector was published, concluding that natural disasters are more damaging to smaller, economically open countries with faster development. Information activities were organised on the automatic recalculation of pensions received by working pensioners. Latvijas Banka participated in the development of the NGFS internal report on the practices of physical risk analytics on an international scale.

Supervision of financial market participants

According to Latvijas Banka's supervisory priorities and inspection plan, one of the priorities for the supervision of financial market participants for 2025–2027 is business model sustainability in a transition economy.

A thematic remote review of investment firms was carried out to ensure the sustainability knowledge and competence of staff who provide investment advice or information to customers on financial instruments, investment services, or ancillary services, or who are involved in material aspects of the suitability assessment process. A thematic horizontal review on the inclusion of climate-related risks in the own risk and solvency assessment process was also conducted.

As regards the integration of sustainability aspects into supervision, a process for monitoring the enforcement of sustainability information was put in place for issuers, in line with the Law on Sustainability Disclosures and ESMA Guidelines on Enforcement of Sustainability Information. The methodology for inspections of credit risk was also complemented by ESG aspects.

To monitor the compliance of the activities performed by financial market participants with the requirements of laws and regulations and to track progress in the area of sustainability, Latvijas Banka surveyed credit institutions on their green loan portfolios, the ESG data available to them, their integration into information systems, and their use in the ESG risk materiality assessment and management processes.

Latvijas Banka maintained its involvement in the Flagship Technical Support Project on ESG risk management framework for the financial sector implemented by the EC Directorate-General for Structural Reform Support. As part of the project, Latvijas Banka received recommendations for improving sustainability supervision, which formed the basis for the 2025–2027 ESG action plan. The project also provided recommendations on improving the collection and processing of ESG data to support the acquisition of data needed for monitoring purposes and their integration into the existing framework of information systems. Recommendations were also received and prototypes of monitoring tools were developed to assess and address climate and greenwashing risks. In the capital market segment, these tools, following their adaptation and integration into the supervisory framework of Latvijas Banka, will enable a detailed analysis of both investment fund portfolios and their disclosed information. During the final phase of the project in 2026, methodologies and supervisory tools will also be developed for climate-related risk assessment (stress testing) of portfolios held by participants in other segments of the financial sector, as well as for reviewing the content of their published sustainability reports.

Latvijas Banka continued to organise the events of the Sustainability Breakfast series, which aim to promote awareness and performance of financial market participants in the area of sustainability and cover a wide range of participants and topics. At the Sustainability Breakfast, financial market participants discussed the topicalities of the ESG regulatory requirements and aspects related to the practical use of local sustainability data, such as the analysis of data obtained from building energy performance certificates and the methods of proxy determination, as well as the integration of flood maps with real estate geolocation data.

Climate-related data and statistics

Latvijas Banka continued to support the ECB's initiatives to assess the likelihood of physical risks (such as floods and natural disasters) at the EU level. Latvijas Banka started providing data on outstanding balances and geographical coordinates of legal entities involved in securities and credit transactions.

As of November 2025, Credit Register participants include the following additional information in the Credit Register regarding new loans issued:

·   the type of financing allocated to environmentally sustainable measures (e.g. for improving the energy performance of the building, purchasing renewable energy equipment, or supporting the sustainability of technological and production processes);

·   information on the primary purpose of the financing used for the financed real estate and its cadastre number, in order to provide Latvijas Banka with additional information for climate change transition risk analysis and to enable the assessment of sustainable financing volumes.

Cash and market infrastructure

The volume of coin exchanges with the central banks of the Baltic States was increased, thereby ensuring local demand for the respective coin denominations and reducing the need to mint new coins. The coin exchange project will continue in 2026.

To promote the circular economy and reduce the environmental impact, a call for ideas was organised for businesses to develop sustainable solutions for recycling of unfit banknotes. The search for the most appropriate solution will continue in 2026.

Films containing 30% recycled plastic were tested for banknote packaging. Based on the test results, around a third of banknotes will be packaged in this type of film moving forward.

Foreign reserves and other non-monetary policy investment portfolios

A third 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 and the redirection of investments towards more sustainable issuers in three investment portfolios contributed to improving portfolio sustainability performance and reducing the carbon footprint.

Social responsibility policy

Latvijas Banka eliminated differences in pay between women and men for equal work, reducing them to a statistically insignificant level of 1% and thus achieving equal pay. In addition, the observed gender pay gap was also narrowed (to 11%). In 2025, Latvijas Banka ranked 4th in the Official Monetary and Financial Institutions Forum's (OMFIF) Gender Balance Index of central banks. This index reflects the share of women among central bank staff, including the representation of women and men in managerial positions.

Skills-based staff management practices were launched with the development and implementation of an artificial intelligence-supported skills identification tool for use by both staff and managers. Emotional intelligence skills were strengthened by measuring the emotional climate index and conducting 360‑degree evaluations of managers.

For the first time in occupational health and safety, the psychosocial risks of the working environment were also assessed. Latvijas Banka was awarded the status "Family-friendly workplace" under a programme implemented by the Society Integration Foundation.

Knowledge enhancement and capacity

Staff knowledge of various sustainability-related issues was enhanced:

·   the newsletter Sustainability News was published on a regular basis, for both internal and external use;

·   educational seminars were organised;

·   as part of the nature restoration activity Doing Good for Nature, venerable trees in Krape Manor Park were freed from overshadowing vegetation by employees of Latvijas Banka;

·   employees took part in the spring clean-up initiative Digital Clean-Up;

·   Latvijas Banka's employees participated in two major European initiatives – European Sustainable Development Week and European Mobility Week. In addition, a Sustainability Month was organised, during which a Power BI tool for analysing CO2 emissions from business travel was launched, educational articles on the environmental impact of mobility were published, a community closet was installed, and the Sustainable Business League 2025 step challenge was organised;

·   the charity campaign Angel Mail, which has become a cherished tradition over the years, was held.

Latvijas Banka shared its experience with the central bank of Ukraine on issues related to monitoring and assessing ESG risks, as well as preparing and publishing reports on the sustainability of the central bank.
Management and organisation