The European Banking Authority (EBA) has released its final Guidelines on environmental scenario analysis, building on its ESG risk management framework. These Guidelines explain what supervisors expect from banks when assessing environmental risks.

Purpose of the Guidelines

The aim is to help banks strengthen their forward-looking assessment and management of environmental risks, such as climate-related events or environmental policy changes.

Two Key Pillars

• Integrating environmental risks into stress testing – Banks should include environmental risks in their existing stress-testing frameworks to understand the short-term financial impact and ensure their capital and liquidity remain adequate.
• Resilience analysis – This looks at the medium- to long-term effects of environmental risks and opportunities on banks’ strategies, business models, and overall risk profiles.

Why this matters

Together, these elements support a more consistent and effective approach to managing environmental risks across the EU banking sector and help banks embed these risks into their day-to-day decision-making and long-term planning.

Application date

The Guidelines will apply from 1 January 2027.