EBA Launches Consultation on ESG Guidelines to Assess Climate and Business Risks

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- The European Banking Authority (EBA) is seeking public input on draft guidelines for incorporating ESG scenario analysis into risk management frameworks.
- The consultation aims to ensure financial institutions are resilient to ESG-related shocks, including the transition to a low-carbon economy.
- Institutions are expected to assess their business models’ resilience to climate-related risks and other ESG factors, with a deadline for feedback set for 16 April 2025.
The European Banking Authority (EBA) has launched a consultation on its draft Guidelines on Environmental, Social, and Governance (ESG) scenario analysis. The guidelines aim to guide institutions in adopting forward-looking approaches that assess resilience against ESG risks, including environmental, social, and governance factors, which are increasingly affecting the financial sector.
These guidelines complement the EBA’s earlier guidelines published in January 2025, focused on managing ESG risks. The EBA emphasizes the growing challenges posed by climate change, environmental degradation, and social issues, urging institutions to adopt comprehensive frameworks to test their financial and business model resilience.
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“Institutions should ensure the safety and soundness of their operations in the face of long-term ESG impacts,” the EBA states.
The consultation process, which is open until 16 April 2025, encourages stakeholders to provide feedback. The EBA will hold a virtual public hearing on 17 March 2025 to discuss the guidelines further. Institutions are required to adopt scenario analysis as part of their strategic and risk management frameworks, with a focus on climate resilience. According to the draft guidelines, scenario analyses should include tests for capital, liquidity, and overall financial resilience against adverse ESG scenarios, including the EU’s target for climate neutrality by 2050.
By embedding ESG risk considerations into their operations, institutions can better manage the long-term implications of these risks. The EBA seeks to foster a unified approach across the EU, ensuring institutions can withstand and adapt to the evolving challenges of a sustainable economy.
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