The European Banking Authority (EBA) has published its roadmap outlining the objectives and timeline for delivering mandates and tasks around sustainable finance and ESG risks. The roadmap is meant to explain the EBA’s sequenced and comprehensive approach over the next three years to integrate environmental, social and governance (ESG) risk considerations in the banking framework and support the EU’s efforts to achieve the transition to a more sustainable economy.

Several legislative acts and initiatives allocate to the EBA new mandates and tasks around sustainable finance and ESG risks. Most of these mandates and tasks are reportedly closely linked to the EBA’s broader objective of contributing to the stability, resilience, and orderly functioning of the financial system. These mandates and tasks cover the three pillars of the banking framework: market discipline, supervision, and prudential requirements, as well as other areas related to sustainable finance and the assessment and monitoring of ESG risks.

EBA sustainable finance plan update This roadmap on sustainable finance is based on the EBA’s first action plan on sustainable finance published in December 2019. The roadmap reportedly ensures the continuity of actions assumed under the previous action plan, while supposedly accommodating the necessary adjustments following the market and regulatory developments, including new mandates and new areas of focus. For transparency and disclosure reasons, the EBA declared its intentions to continue its work related to the development and implementation of institutions’ ESG risks and wider sustainability disclosures.

Similarly, the EBA will reportedly continue its efforts to ensure that ESG factors and risks are adequately integrated into institutions’ risk management framework and in their supervision, including through further developments on climate stress tests. In the area of prudential regulation, the EBA has initiated an assessment of whether amendments to the existing prudential treatment of exposures to incorporate environmental and social considerations would be justified. Furthermore, the EBA will seek to contribute to the development of green standards and labels and measures to address emerging risks in this field, such as greenwashing.

Finally, the EBA will be assessing and monitoring developments in sustainable finance and institutions’ ESG risk profiles, including based on the expected supervisory reporting. The roadmap was developed based on the current state of the regulatory framework and reflects the EBA’s current expectations regarding specific mandates and tasks. However, considering the ongoing regulatory developments, including the review of the banking package (CRR/CRD), the scope and timelines of specific tasks will only be fully known once the legislative processes are finalised, the official press release concludes.

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