The European Banking Authority (EBA) today published its final Guidelines on the management of Environmental, Social and Governance (ESG) risks. The Guidelines set out requirements for institutions for the identification, measurement, management and monitoring of ESG risks, including through plans aimed at ensuring their resilience in the short, medium and long term.The Guidelines specify requirements regarding the internal processes and ESG risk management arrangements that institutions should have in place in accordance with the Capital Requirements Directive (CRD6). They will contribute to ensuring the safety and soundness of institutions as ESG risks intensify and the EU transitions towards a more sustainable economy.The Guidelines specify the content of plans to be prepared by institutions with a view to monitoring and addressing the financial risks stemming from ESG factors, including those arising from the adjustment process towards the objective of achieving climate neutrality in the EU by 2050. These plans will support the preparedness of institutions for the transition and should be consistent with transition plans prepared or disclosed by institutions under other pieces of EU legislation.The Guidelines will apply from 11 January 2026 except for small and non-complex institutions for which the Guidelines will apply at the latest from 11 January 2027.Legal basis and backgroundThe Guidelines are based on Article 87(a)5 of the CRD. They will be complemented by Guidelines on ESG scenario analyses. The Guidelines on the management of ESG risks have been developed in line with the EBA’s roadmap on sustainable finance and as part of the EBA actions outlined in the roadmap on the implementation of the EU banking package.
Brief
"On January 09, 2025, the European Banking Authority (EBA) issued an update regarding The EBA publishes its final Guidelines on the management of ESG risks. The Guidelines set out requirements for institutions to identify, measure, manage and monitor ESG risks through plans aimed at ensuring their resilience in the short, medium and long term. These plans will support preparedness for the transition towards a more sustainable economy, with applications from January 11, 2026."
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Purpose
The European Banking Authority (EBA) has published its final Guidelines on the management of Environmental, Social, and Governance (ESG) risks to set out requirements for institutions regarding the identification, measurement, management, and monitoring of ESG risks. The purpose of these guidelines is to ensure the safety and soundness of institutions as ESG risks intensify and the EU transitions towards a more sustainable economy.
The guidelines specify that institutions should have internal processes and ESG risk management arrangements in place, which will contribute to ensuring their resilience in the short, medium, and long term. The requirements are based on Article 87(a)5 of the Capital Requirements Directive (CRD6) and aim to support the preparedness of institutions for the transition towards achieving climate neutrality in the EU by 2050.
Effects on Industry
The publication of these guidelines will have significant effects on the banking industry, as institutions will be required to develop plans to monitor and address financial risks stemming from ESG factors. These plans should be consistent with transition plans prepared or disclosed by institutions under other pieces of EU legislation.
The guidelines will apply from 11 January 2026, except for small and non-complex institutions, which will have until 11 January 2027 to comply. This will require institutions to reassess their risk management practices and develop strategies to mitigate ESG risks, which may impact their business operations and financial performance.
Relevant Stakeholders
The guidelines are relevant to all European banking institutions, including small and non-complex institutions. The publication of these guidelines is expected to affect:
- Banks and credit institutions: These institutions will be required to develop plans to monitor and address ESG risks, which may impact their business operations and financial performance.
- Financial institutions: These institutions will also need to reassess their risk management practices and develop strategies to mitigate ESG risks.
- Regulators: The European Banking Authority (EBA) and national regulatory authorities will be responsible for ensuring compliance with these guidelines.
Next Steps
To comply with the guidelines, institutions should:
- Develop plans to monitor and address financial risks stemming from ESG factors.
- Ensure that their risk management practices are consistent with transition plans prepared or disclosed by institutions under other pieces of EU legislation.
- Reassess their internal processes and ESG risk management arrangements.
- Implement the required changes by 11 January 2026 (or 11 January 2027 for small and non-complex institutions).
Any Other Relevant Information
The guidelines are part of the EBA’s roadmap on sustainable finance and have been developed in line with the EBA actions outlined in the roadmap on the implementation of the EU banking package. The guidelines will be complemented by Guidelines on ESG scenario analyses, which will provide further guidance on how to manage ESG risks.
The publication of these guidelines is a significant step towards ensuring that European banking institutions are prepared for the transition towards achieving climate neutrality in the EU by 2050.
