On 9 January 2025, the European Banking Authority (EBA) published a Final Report containing Guidelines on the management of Environmental, Social and Governance (ESG) risks (the Guidelines).

The Guidelines address ESG risk management processes of ‘financial institutions’ (as per Article 4(1) point 3 of the Capital Requirements Regulation) as part of their broader risk management framework. They specify robust governance arrangements financial institutions need to have in place in accordance with Articles 87a(1) and 74 of the Capital Requirements Directive IV (CRD IV) covering:

  • The minimum standards and reference methodologies for the identification, measurement, management, and monitoring of ESG risks, in accordance with Article 87a(5)a) of the CRD IV.
  • Qualitative and quantitative criteria for the assessment of the impact of ESG risks on the risk profile and solvency of institutions in the short, medium, and long term, in accordance with Article 87a(5)c) of the CRD IV.
  • The content of plans to be prepared in accordance with Article 76(2) of the CRD IV by the management body, which includes specific timelines and intermediate quantifiable targets and milestones, in order to monitor and address the financial risks stemming from ESG factors, including those arising from the process of adjustment and transition trends towards the relevant Member States and EU regulatory objectives in relation to ESG factors, in particular the objective to achieve climate neutrality by 2050 as set out in Regulation (EU) 2021/1119, as well as, where relevant for international active institutions, third country legal and regulatory objectives, in accordance with Article 87a(5)b) of that Directive.

The Guidelines also complement and further specify the EBA Guidelines on internal governance and EBA Guidelines on loan origination and monitoring in relation to the management of ESG risks.

Next steps

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.