EBA’s new guidelines offer a beacon of hope amid regulatory uncertainty
While several North American banks exit the voluntary NZBA (Net Zero Banking Alliance), European banks must bolster their climate risk frameworks. The European Banking Authority’s (EBA) recently published guidelines on ESG risk management offer a beacon of hope amidst the turmoil that currently surrounds the EU’s sustainable finance regulations. These guidelines are encouraging in both substance and form, reflecting prudential supervisors’ commitment to aligning the banking sector with the bloc’s climate and sustainability goals.
The most notable takeaway is the requirement to ‘develop a single, comprehensive strategic planning process’ that meets all regulatory and business needs to prepare for the transition. Banks should leverage this holistic approach to ensure consistent transition plans whether for prudential or regulatory purposes (such as CSRD and CSDDD). The need for consistency – a point already reiterated by I4CE – also fuels the debate on the upcoming omnibus ‘simplification’ regulation through which the European Commission (EC) aims to reduce firms’ sustainability reporting requirements by 25%.
