On 5 November 2025, the European Banking Authority (EBA) published its final Guidelines on environmental scenario analysis, which complements the EBA Guidelines on the management of Environmental, Social and Governance (ESG) risks by specifying supervisory expectations regarding how institutions should conduct environmental scenario analysis.

Background

The Guidelines, like the Guidelines on the management of ESG risks, are based on Article 87(a)5 of the Capital Requirements Directive VI. They also fulfil Article 177(2a) of the Capital Requirements Regulation 3.

For institutions using the Internal Ratings-Based Approach for calculating the own funds requirements for credit risk, the Guidelines are intended to specify the way in which ESG risks, and in particular physical and transition risks stemming from climate change, are taken into account in the scenarios used for credit risk internal stress testing.

The Guidelines provide clarifications in the following main areas:

  • Section 4 outlines the various applications of scenario analysis for institutions and introduce a progressive and proportionate approach to incorporating it into their management framework.
  • Section 5 provides guidance on the prerequisites for conducting scenario analysis, with a particular focus on identifying the transmission channels that translate climate risks into financial impacts and on the criteria for setting appropriate scenarios. Furthermore, the possibility to use a simplified approach in the form of sensitivity analysis is clarified.
  • Section 6 elaborates on the distinctive features to be taken into account when conducting an environmental stress test–complementing the existing guidelines on institutions’ stress testing – and explores how scenario analysis can be used to shape and refine the institution’s strategy while testing the resilience of its business model against a range of plausible futures.

Next steps

The Guidelines will be translated into the official EU languages and published on the EBA’s website. The deadline for Member State competent authorities to report whether they comply with the Guidelines will be two months after the publication of the translations.

The Guidelines will apply from 1 January 2027.