On 27 June 2025, the European Supervisory Authorities (ESAs) launched a public consultation on their draft joint guidelines for Environmental, Social and Governance (ESG) stress testing as mandated by the Solvency II Directive (Solvency II) and the Capital Requirements Directive IV (CRD IV).

Background

Article 100(4) CRD IV and Article 304c(3) of Solvency II mandate the ESAs, through the Joint Committee, to develop joint guidelines to ensure that consistency, long-term considerations and common standards for assessment methodologies are integrated into the stress testing of ESG risks. The Joint Committee is to publish those joint guidelines by 10 January 2026.

Purpose

The draft joint Guidelines are intended to ensure that Member State competent authorities (NCAs) consistently integrate ESG risks into their supervisory stress testing activities. As such they are addressed to NCAs and should be applied when performing supervisory stress tests, either by integrating ESG-related risks into their existing framework or by measuring the impact of ESG risks under adverse scenarios in a complementary assessment, where applicable according to sectoral legislation.

The draft joint guidelines provide guidance on the design and features of stress testing with ESG elements, as well as the organisational and governance arrangements such stress tests would need to have.  The draft joint guidelines also consider a phased or gradual approach that focuses primarily on climate risk, while introducing some guidance on other ESG aspects and for NCAs to focus on the most material ESG risks in stress testing frameworks.

Next Steps

The deadline for comments on the draft joint guidelines is 19 September 2025. Feedback from the public consultation will be considered by Q3/Q4 2025.

The joint guidelines will be finalised and published by 10 January 2026.