The European Banking Authority (EBA) has released specific requirements for managing ESG-related risks.
The guidelines outline how institutions should identify, measure, manage, and monitor ESG risks, aiming to establish a risk management framework in line with EU regulations such as the Capital Requirements Directive (CRD6), Corporate Sustainability Due Diligence Directive (CSDDD), and the Corporate Sustainability Reporting Directive (CSRD). These efforts are part of the preparation for achieving EU climate neutrality by 2050.
The EBA emphasizes that ESG risks, particularly environmental risks, pose significant threats to financial institutions. Businesses must address these risks over short, medium, and long-term horizons. The guidelines stress the critical role of the financial sector in advancing toward climate neutrality and fostering a sustainable economy, highlighting the effects of climate change, biodiversity loss, and other ESG factors on the economy.
Key requirements outlined in the guidelines include:
- Compliance and reporting obligations
- Subject matter, scope, and definitions
- Implementation
Additionally, the guidelines offer a reference methodology for identifying and measuring ESG risks, as well as minimum standards for managing and monitoring these risks. Amendments to the CRD include clarifications on the understanding and definitions of ESG risks and guidance for internal governance.
These guidelines will take effect for institutions by January 11, 2026, with small and non-complex institutions given an extension until January 11, 2027.