(Bloomberg) -- The European Union should identify companies that harm the environment so that banks and asset managers can better handle the risks stemming from climate change, according to the European Central Bank.

The ECB threw its weight behind the controversial idea in a submission to the European Commission, which is seeking input on how to advance its push to green the financial system. The bloc has so far focused on identifying sustainable activities only, which means authorities and finance firms are left dealing with a data gap, according to the Frankfurt-based institution.

“Both banks and supervisors are currently faced with the issue of the absence of a common definition of brown activities to help build a risk assessment framework,” the ECB said.

The central bank itself has repeatedly drawn criticism for buying bonds of fossil fuel-related businesses. Last year, President Christine Lagarde promised to put green issues front and center of a strategic review, but that big policy rethink has been postponed because of the coronavirus pandemic.

The idea to create a list of “brown” activities was discussed as part of the EU’s plan to define sustainable investments. While many experts support this approach, some companies fear it could penalize them and spark asset sales.

The EU wants to become climate-neutral by the middle of the century in a bid to lead the fight against global warming. The transition will affect every sector of the economy, from energy to transport and construction.

In its submission to the commission, the EU’s executive arm, the ECB also sought to manage expectations as to how much the financial system can contribute to reducing greenhouse-gas emissions. The sector can only play a “supporting role” within an overall framework setting the right incentives, including through fiscal measures like carbon pricing, it said.

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