European Banking Authority launches consultation on Guidelines for ESG scenario analysis

The European Banking Authority has launched a public consultation on draft Guidelines on environmental, social and governance (ESG) scenario analysis, setting expectations for how institutions should adopt forward-looking approaches and use scenario analysis within their management frameworks to assess resilience to ESG-related impacts. The draft complements the EBA Guidelines on the management of ESG risks published on 9 January. The Guidelines set principles for developing a scenario analysis framework that supports decision-making in changing economic and physical conditions, and for testing the financial resilience of an institution, including capital and liquidity, to ESG-related shocks, starting with climate. They also cover assessing business model resilience under different plausible scenarios, including scenarios consistent with achieving climate neutrality in the European Union by 2050. The draft was developed in line with the EBA Roadmap on Sustainable Finance and as part of actions to implement the EU banking package, delivering a mandate under Article 87(a)5 of the Capital Requirements Directive (CRD6). The consultation runs until 16 April 2025. A virtual public hearing is scheduled for 17 March 2025 (14:30 to 16:00 CET), with registration requested by 13 March 2025 at 16:00 CET; the EBA will publish contributions after the consultation ends unless confidentiality is requested and will use the feedback to finalise the Guidelines.