EBA Consults on Management of ESG risks

The European Banking Authority (EBA) launched a public consultation on draft Guidelines on the management of Environmental, Social and Governance (ESG) risks.

The draft Guidelines set out requirements for institutions for the identification, measurement, management and monitoring of ESG risks, including through plans aimed at addressing the risks arising from the transition towards an EU climate-neutral economy. The consultation runs until 18 April 2024.

Climate change, environmental degradation, social issues and other environmental, social and governance factors are posing considerable challenges for the economy that impact the financial sector. The risk profile and business model of institutions may be affected by ESG risks, in particular environmental risks through transition and physical risk drivers.

To ensure the safety and soundness of institutions in the short, medium and long term, the Guidelines set requirements for the internal processes and ESG risks management arrangements that institutions should have in place. As part of it, these Guidelines set out principles for the development and content of institutions’ plans in accordance with the Capital Requirement Directive (CRD6), with a view to monitoring and adequately addressing the financial risks stemming from ESG factors, including those arising from the adjustment process towards the objective of achieving climate neutrality in the EU by 2050.

Consultation process

Comments to the consultation paper can be sent by clicking on the “send your comments” on the EBA’s consultation page. The deadline for the submission of comments is 18 April 2024. The EBA will consider the feedback received to this consultation when finalising the guidelines.

All contributions received will be published following the end of the consultation, unless requested otherwise.

The EBA will hold a virtual public hearing on the consultation paper on 28 February 2024 from 14:00 to 16:00 CET. The EBA invites interested stakeholders to register using this link by 21 February 2024 at 16:00 CET. The dial-in details will be communicated to those who have registered for the meeting.

Legal basis and background

The draft Guidelines were developed in line with the EBA’s roadmap on sustainable finance and as part of the planned EBA actions in accordance with its roadmap on the implementation of the EU banking package. They address the mandate specified in letters a, b and c of Article 87(a)5 of the CRD. Letter d of that mandate referring to the criteria for setting specific climate-related scenarios will be addressed through a subsequent EBA work.