03 February 2021

EBF: Management and supervision of ESG risks for credit institutions and investment firms: EBF response to EBA consultation

The European Banking Federation has responded to the European Banking Authority’s consultation on incorporating ESG risks into the governance, risk management and supervision of credit institutions and investment firms. The increasingly active role banks play in the assessment of climate risks can impact their clients’ viability and solvency in the medium and long term, in turn affecting bank risk and profitability. While the EBF supports efforts to proactively incorporate ESG factors into risk management as risk drivers, this should not substitute necessary policy actions for economic actors to change their behaviour. Public policy should be the primary driver for decreasing overall risk in the economy and fostering sustainable economic development. The banking industry is committed to working with policymakers to achieve the EU’s climate objectives, but this cannot be a substitute for a potential lack of political action.

The EBF response covers the following elements:

• Challenges and data availability
• Phase in approach
• Clarity on the objectives
• Double materiality
• Risk horizons
• Proportionality and materiality of risks
• Definition of ESG risks and factors
• Social and Governance risks
• Use of indicators
• EU Taxonomy
• Methodologies
• Integration of ESG factors in modelling and capital planning
• Liquidity and funding
• Stress testing
• Pricing
• Consistency between EBA & ECB frameworks is needed

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Find the EBF response to this consultation by clicking the ‘full document’ button below:
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FOR MORE INFORMATION:
Sustainable Finance page on the EBF website: CLICK HERE

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