The EBA’s latest Consultation Paper: Incorporating EGS risks into the governance, risk management and supervision of institutions

The European Banking Authority (EBA) has recently published a Discussion Paper regarding Environmental, Social and Governance (ESG) risks management and supervision, whose aim is to collect feedback that will be further taken into account while preparing the final report on this topic. Thus, the Discussion Paper proposes how the ESG factors and ESG risks should be included in the regulatory and supervisory framework for credit institutions and investment firms.

Although there are numerous methods for assessing the ESG risks on the market at the moment, all of these methods ultimately have the same objective: assessing the alignment of the institutions’ portfolio with the global goals in terms of sustainability and offering insights into the risk caused by exposures to certain sectors.

The EBA mandates will help defining and developing the framework in the field of sustainable finance that should provide insights for institutions and policymakers, supervisors as well as to wider market participants.