EBA Publishes Final Guidelines on the Management of ESG Risks
On 9 January 2025, the European Banking Authority (EBA) published its final guidelines on the management of environmental, social, and governance (ESG) risks. The guidelines have been developed in line with the EBA’s roadmap on sustainable finance and as part of the EBA’s actions outlined in the roadmap on the implementation of the EU banking package. The ESG guidelines are based on Article 87a (5) of the Capital Requirements Directive (CRD VI), which requires the EBA to issue guidelines on minimum standards and reference methodologies for the identification, measurement, management, and monitoring of ESG risks by institutions.
The guidelines cover:
- minimum standards and reference methodologies for the identification, measurement, management, and monitoring of ESG risks;
- requirements regarding the internal processes and ESG risk management arrangements that institutions should have in place; and
- the content of the short-, medium-, and long-term plans institutions must prepare in order to monitor and address the financial risks stemming from ESG factors, including those arising from the adjustment process towards the EU’s objective of achieving climate neutrality by 2050.
The guidelines will generally apply from 11 January 2026, with small and non-complex institutions receiving a further transition period running until 11 January 2027 at the latest. The EBA also plans to release additional guidelines on ESG scenario analyses.
Latham & Watkins will continue to monitor the release of further FAQ documents relating to the ESG requirements globally.