Sustainable finance aims at integrating Environmental, Social or Governance (ESG) criteria into financial services, and at supporting sustainable economic growth. It also aims at increasing financial actors' awareness and transparency about the need to mitigate ESG risks via an appropriate management, considering in particular the longer-term nature of such risks and the uncertainty on their valuation and pricing.
In March 2018, the European Commission published its Action plan on Financing Sustainable Growth, setting an EU strategy on sustainable finance and a roadmap for future work across the financial system. On the back of this plan, the EBA prepared its own work plan and identified its key priorities. These include considerations on how ESG can be incorporated into the regulatory and supervisory framework of EU credit institutions. The EBA also has an important role in monitoring market practices related to sustainability, and engaging with relevant stakeholders and the industry.
The sections below include relevant news and events related to the EBA's involvement in sustainable finance as well as any publication on this topic.
On 10 December 2021 the European Commission Delegated Act of 6 July 2021 supplementing Article 8 of the Taxonomy Regulation was published in the Official Journal. This regulation specifies the content, methodology and presentation of information to be disclosed by financial and non-financial undertakings concerning the proportion of environmentally sustainable economic activities in their business, investments or lending activities. The EBA together with other ESAs provided the European Commission with their advice towards the development of this regulation.
On 9 December 2021, a first delegated act on sustainable activities for climate change adaptation and mitigation objectives, supplementing Taxonomy Regulation, was published in the Official Journal.
On 3 November 2021, the EBA published its Statement in the context of COP26, which highlights the EBA's efforts to update and enhance the entire supervisory and prudential regulatory framework in the environmental, social and governance (ESG) domain.
On 6 July 2021, the European Commission adopted a communication on The Strategy on Financing the Transition to a Sustainable Economy which builds on the 2018 Action Plan on Financing Sustainable Growth and puts forward four key policy areas for sustainable finance in the next years: transition finance, inclusiveness, international ambition as well as resilience and contribution.
On 23 June 2021, the EBA published its Report on Environmental, Social and Governance (ESG) risks management and supervision. The Report, which is a key component of the EBA’s broader ESG work, provides a comprehensive proposal on how ESG factors and ESG risks should be included in the regulatory and supervisory framework for credit institutions and investment firms.
On 22 June 2020 the Taxonomy Regulation was published in the Official Journal of the European Union and entered into force on 12 July 2020. The Taxonomy Regulation establishes the basis for the EU taxonomy by setting out overarching conditions (i.e., sustainable contribution to environmental objectives, no significant harming, minimum social and governance safeguards, and technical screening criteria) that an economic activity has to meet in order to qualify as environmentally sustainable.
On 6 December 2019, the EBA published its Action Plan on sustainable finance outlining its approach and timeline for delivering mandates related to environmental, social and governance factors. The Action plan explains the EBA’s sequenced approach, starting with key metrics, strategies, risk management and moving towards scenario analysis and evidence for any adjustments to risk weights. The Action Plan also aims to communicate key messages on the EBA’s policy direction and the expectations from financial institutions on areas where action is needed now to support the move towards more sustainable finance in the EU. Click here to see the Action Plan.
On 18 June 2019, the TEG on sustainable finance published three new reports:
The Commission has also published the new guidelines for companies on how to report climate-related information. These guidelines are built on the proposals made by the TEG in January 2019.
To accompany these reports and provide a venue for an open exchange with stakeholders, the Commission organised a Stakeholder dialogue on sustainable finance on 24 June 2019. The event also featured a session on the future of sustainable finance, with the ESAs participation. Click here to access the video of the event.
On 4 April 2019, the EBA and the European Banking Federation held a workshop on sustainable finance. This workshop highlighted the willingness of EU supervisors, regulators and banks to move forward on the various challenges related to sustainable finance and engage in a structured dialogue for incorporating sustainability into EU banks' frameworks and risk management.
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ESG risks management and supervision factsheet
Environmental social and governance Pillar 3 disclosures