**CBC Deepens Focus on Sustainable Investment**
The Central Bank of Cyprus (CBC) has made significant strides in enhancing the sustainability profile of its non-monetary policy portfolios throughout 2025, as outlined in its latest annual climate-related financial disclosures released this week. The report highlights a continued commitment to reducing climate-related transition risks, with climate considerations now fully integrated into the bank's investment processes, risk monitoring, and reporting practices.
As of May 12, 2025, the CBC's total currency reserves amounted to €1.77 billion, reflecting an increase of €153 million compared to the previous year. This growth underscores the bank’s strategic approach to align its investment portfolios with the decarbonization goals set by the 2015 Paris Agreement and the European Union’s climate neutrality objectives.
A notable advancement in this year’s disclosures is the inclusion of scope 3 relative metrics for non-sovereign issuers, marking the first time these metrics have been reported separately from scope 1 and scope 2 emissions. This change is aimed at enhancing transparency, although it comes in light of ongoing data quality challenges. The report indicates a decline in the weighted average carbon intensity of the bank's portfolios compared to 2024, signifying a lower relative exposure to carbon-intensive issuers.
One of the key highlights of the CBC's sustainability efforts is the increase in investments in green, social, and sustainability bonds, which rose to 15 percent of total reserves by the end of 2025, up from 10 percent in 2023. The bank now holds €268 million in these sustainable instruments, with a dedicated green bond portfolio that expanded by €38 million over the past year, reaching a total of €93 million.
The governance of these portfolios is overseen by the Governor and the Board of Directors, who bear ultimate responsibility for establishing investment objectives. In a move to bolster oversight, the CBC established a Sustainability Committee at the Board level in 2025. This committee is tasked with assisting in the definition and review of the bank’s broader sustainability strategy.
The CBC's investment framework, which was updated in 2022 to incorporate sustainable and responsible investment considerations, employs an internally developed scoring system to evaluate eligible sovereign issuers. This system rewards countries with higher sustainability scores by allowing them higher investment limits, while those that fall short in environmental performance face reductions. This strategy effectively shifts the portfolio toward countries that are recognized as better climate actors.
Despite these advancements, the Central Bank of Cyprus remains realistic about the limitations of its influence. A significant portion of its holdings consists of bonds issued by sovereign entities, and the bank acknowledges that achieving its sustainability objectives largely depends on the commitments and progress of these governments as signatories to the Paris Agreement and adopters of European Climate Law.
Looking ahead, the CBC plans to continue strengthening its risk management practices in accordance with evolving Eurosystem methodologies. The bank intends to develop additional climate scoring tools for all approved government-related issuers and eligible financial counterparties as more robust data becomes available.
The CBC's ongoing efforts to integrate sustainability into its investment strategies reflect a growing recognition of the importance of climate considerations in financial decision-making. As the bank navigates the challenges and opportunities presented by the evolving landscape of sustainable finance, its commitment to transparency and responsible investment practices positions it as a proactive participant in the global movement toward a more sustainable future.