Shearman & Sterling LLP | FinReg | European Banking Authority Publishes Action Plan on Sustainable Finance
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  • European Banking Authority Publishes Action Plan on Sustainable Finance

    The European Banking Authority has published an action plan on sustainable finance, setting out how it intends to deliver on its aims to help combat environmental, social and governance risks and providing clarity on the direction of its policy in this area. The EBA has been mandated to contribute to work on ESG risks under various pieces of EU legislation and will focus on environmental factors and climate change in its initial phase of work. The action plan also sets out the EBA’s projected timelines and milestones on sustainable finance.

    The EBA’s ESG mandates are set out under the amended EBA Regulation, the revised Capital Requirements Regulation and Capital Requirements Directive, the new Investment Firms Regulation and Investment Firms Directive and the European Commission’s Action Plan on Financing Sustainable Growth. The EBA is required to undertake activities such as: (i) taking into account sustainable business models and integration of ESG factors when conducting EBA tasks; (ii) assessing the potential inclusion of ESG risks in national regulators’ supervisory review and evaluation processes; (iii) developing technical standards for the implementation of ESG disclosure requirements by large institutions under CRR2; (iv) assessing whether prudential treatment of exposures related to ESG-related assets or activities would be justified; and (v) collecting evidence of potential excessive short-term pressure from capital markets on corporations, in particular triggered by an increased focus on long-term risks such as climate change.

    The EBA is expected to deliver a significant amount of this work between 2019 and 2025. It will begin by focusing on strategy and risk management, followed by key metrics and disclosure, stress testing and scenario analysis and finally prudential treatment.

    View the EBA's action plan on sustainable finance.

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