The European Banking Authority (EBA) announced a new consultation for banks on identifying, measuring and managing ESG risks, including setting plans to address risks arising from the EU’s transition to a climate-neutral economy.

Requirements would include undertaking regular assessments of ESG risks through data analysis focusing on exposure, portfolio and scenario-based approaches. It is recommended that the ESG risks become incorporated into regular risk frameworks such as credit, market, liquidity, operational, reputational and concentration risks, across various term time horizons.

The guidelines would also require institutions to develop Capital Requirement Directive-based (CRD6) transition plans with a view to monitor and adequately address the financial risks stemming from ESG factors, while transitioning towards achieving climate neutrality in the EU by 2050.

The consultation is open until 18 Apr 2024 and the feedback will be considered by the EBA while creating final guidelines. For more information go to EBA announcement.

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