EBA publishes final guidelines on ESG risk management

Editorial

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.

The guidelines outline how institutions should identify, measure, manage, and monitor ESG risks. The aim of the guidelines is to establish a risk management framework aligned with EU regulation such as the Capital Requirements Directive (CRD6), Corporate Sustainability Due Diligence Directive (CSDDD), Corporate Sustainability Reporting Directive (CSRD), and prepare for EU climate neutrality by 2050.

The EBA outlines how ESG risks, and environmental risks in particular pose threats to institutions, therefore businesses need to meet these risks in the short, medium, and long term. The guidelines point out the crucial role of the financial industry in moving towards climate neutrality and developing a sustainable economy, as well as the impact that climate change, biodiversity loss, environmental degradation and other ESG factors have on the economy.

The guidelines provide requirements for the following factors:

1. Compliance and reporting obligations
2. Subject matter, scope, and definitions
3. Implementation

The guidelines further provide guidance on reference methodology for the identification and measurement of ESG risks, and minimum standards and reference methodology for the management and monitoring of ESG risks. As part of the guidelines, the EBA has amended the CRD to include provisions on the understanding and definitions of ESG risks along with other risks, and included guidance for internal governance.

The guidelines will apply to institutions by 11 January 2026, except for small and non-complex institutions who have until 11 January 2027.