Article 87a
Environmental, social and governance risks
1.
Competent authorities shall ensure that institutions have, as part of their governance arrangements, including the risk management framework required under Article 74(1), robust strategies, policies, processes and systems for the identification, measurement, management and monitoring of ESG risks over the short, medium and long term.
2.
The strategies, policies, processes and systems referred to in paragraph 1 shall be proportionate to the scale, nature and complexity of the ESG risks of the business model and scope of the institution’s activities, and consider the short and medium term, and a long-term time horizon of at least 10 years.
3.
Competent authorities shall ensure that institutions test their resilience to long-term negative impacts of ESG factors, both under baseline and adverse scenarios within a given timeframe, starting with climate-related factors. For such resilience testing, competent authorities shall ensure that institutions include a number of ESG scenarios reflecting potential impacts of environmental and social changes and associated public policies on the long-term business environment. Competent authorities shall ensure that in the resilience testing process, institutions use credible scenarios, based on the scenarios elaborated by international organisations.
4.
Competent authorities shall assess and monitor the development of institutions’ practices concerning their ESG strategies and risk management, including the plans that include quantifiable targets and processes to monitor and address the ESG risks arising in the short, medium and long term, to be prepared in accordance with Article 76(2). That assessment shall take into account the institutions’ sustainability-related product offerings, their transition finance policies, related loan origination policies, and ESG-related targets and limits. Competent authorities shall assess the robustness of those plans as part of the supervisory review and evaluation process.
Where relevant, for the assessment referred to in the first subparagraph, competent authorities may cooperate with authorities or public bodies in charge of climate change and environmental supervision.
5.
By 10 January 2026, EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, to specify:
(a)
the minimum standards and reference methodologies for the identification, measurement, management and monitoring of ESG risks;
(b)
the content of plans to be prepared in accordance with Article 76(2), which shall include specific timelines and intermediate quantifiable targets and milestones, in order to monitor and address the financial risks arising from ESG factors, including those arising from the process of adjustment and from transition trends in the context of the relevant Union and Member States regulatory objectives and legal acts in relation to ESG factors, in particular the objective to achieve climate neutrality, as well as, where relevant for internationally active institutions, third-country legal and regulatory objectives;
(c)
qualitative and quantitative criteria for assessing the impact of ESG risks on the risk profile and solvency of institutions in the short, medium and long term;
(d)
criteria for setting the scenarios referred to in paragraph 3, including the parameters and assumptions to be used in each of the scenarios, specific risks and time horizons.
Where relevant, the methodologies and assumptions sustaining the targets, the commitments and strategic decisions disclosed by the content of the plans referred to in Article 19a or 29a of Directive 2013/34/EU, or other relevant disclosure and due diligence frameworks, shall be consistent with the criteria, methodologies and the targets as referred to in the first subparagraph of this paragraph, and also with the assumptions and commitments included in those plans.
EBA shall update the guidelines referred to in the first subparagraph on a regular basis, to reflect the progress made in measuring and managing ESG risks as well as the development of the Union regulatory objectives on sustainability.