The European Banking Authority (EBA) has published draft guidelines for dealing with ESG risks.

The guidelines set out requirements for banks to measure, manage and monitor their environmental, social and governance risks. The requirements include regular materiality assessments of risks, ensuring the ability to identify risks through data processes and methods, and integrating ESG risks into their regular risk management frameworks. The impact on all risk categories over different time horizons should be taken into account.

In contrast to the CSRD and the proposed CSDDD, which focus on the compatibility of business models with the EU’s climate and sustainability goals, the EBA’s proposal focuses on assessing ESG risks and embedding them in financial institutions’ strategies and policies.

The draft guidelines have been developed in line with the EBA Roadmap on Sustainable Finance. The guidelines are intended to encourage banks to actively address the changes brought about by the sustainability transformation.