Response to consultation on draft Guidelines on the management of ESG risks
Question 1: Do you have comments on the EBA’s understanding of the plans required by Article 76(2) of the CRD, including the definition provided in paragraph 17 and the articulation of these plans with other EU requirements in particular under CSRD and the draft CSDDD?
Although the aims are in principle acceptable, there is a risk to increase the bureaucratic burden for companies. We believe that it is necessary to ensure that there is no overlap between the different types of plans, but that they complement and integrate each other.
Question 2: Do you have comments on the proportionality approach taken by the EBA for these guidelines?
We believe that the suggested approach is the right one.
Question 3: Do you have comments on the approach taken by the EBA regarding the consideration of, respectively, climate, environmental, and social and governance risks? Based on your experience, do you see a need for further guidance on how to handle interactions between various types of risks (e.g. climate versus biodiversity, or E versus S and/or G) from a risk management perspective? If yes, please elaborate and provide suggestions.
We believe it is right to give importance to the concept of double materiality linked to environmental and, in particular, climate risks. However, it is also important to highlight the social impact of corporate governance factors, which often take a back seat.
Question 4: Do you have comments on the materiality assessment to be performed by institutions?
The materiality assessment seems to us to be well defined.
Question 5: Do you agree with the specification of a minimum set of exposures to be considered as materially exposed to environmental transition risk as per paragraphs 16 and 17, and with the reference to the EU taxonomy as a proxy for supporting justification of non-materiality? Do you think the guidelines should provide similar requirements for the materiality assessment of physical risks, social risks and governance risks? If yes, please elaborate and provide suggestions.
Yes, we agree. However, we believe that great care should be taken to identify the criteria used to assess whether or not the justifications provided are valid (which are not indicated in the guidelines).
Question 6: Do you have comments on the data processes that institutions should have in place with regard to ESG risks?
We believe that the use of estimates and/or proxies can only be contemplated as a last resort, and that both the choice to use them (lack of data or unreliable data) and the choice of a certain estimate and/or proxy instead of others must be justified.
Question 7: Do you have comments on the measurement and assessment principles?
The principles seem to us to be coherent, despite the fact that we see an excessive focus on environmental issues (to the detriment of other factors, social and governance).
Question 8: Do you have comments on the exposure-based methodology?
We have no comment on this, the methodology set out seems to us to be sufficiently clear.
Question 9: Do you have comments on the portfolio alignment methodologies, including the reference to the IEA net zero scenario? Should the guidelines provide further details on the specific scenarios and/or climate portfolio alignment methodologies that institutions should use? If yes, please elaborate and provide suggestions.
The methodology presented seems to us to be sufficiently clear and we appreciate the science-based approach followed in the definition of this methodology. However, the measurement referring only to the emissions of a financial portfolio is objectively very complex: S and G impacts - and above all the issue of corporate governance - are also neglected here, which must first and foremost inspire the social and environmental behaviour of a company in which one decides to invest.
Question 10: Do you have comments on the ESG risks management principles?
The principles seem consistent to us and the "minimum" range of tools for managing and monitoring ESG risks seems sufficient to us.
Question 11: Do you have comments on section 5.2 – consideration of ESG risks in strategies and business models?
No
Question 12: Do you have comments on section 5.3 – consideration of ESG risks in risk appetite?
No
Question 13: Do you have comments on section 5.4 – consideration of ESG risks in internal culture, capabilities and controls?
No
Question 14: Do you have comments on section 5.5 – consideration of ESG risks in ICAAP and ILAAP?
No
Question 15: Do you have comments on section 5.6 – consideration of ESG risks in credit risk policies and procedures?
No
Question 16: Do you have comments on section 5.7 – consideration of ESG risks in policies and procedures for market, liquidity and funding, operational, reputational and concentration risks?
No
Question 17: Do you have comments on section 5.8 – monitoring of ESG risks?
No
Question 18: Do you have comments on the key principles set by the guidelines for plans in accordance with Article 76(2) of the CRD?
No
Question 19: Do you have comments on section 6.2 – governance of plans required by the CRD?
No
Question 20: Do you have comments on the metrics and targets to be used by institutions as part of the plans required by the CRD? Do you have suggestions for other alternative or additional metrics?
No
Question 21: Do you have comments on the climate and environmental scenarios and pathways that institutions should define and select as part of the plans required by the CRD?
No
Question 22: Do you have comments on section 6.5 – transition planning?
No
Question 23: Do you think the guidelines have the right level of granularity for the plans required by the CRD? In particular, do you think the guidelines should provide more detailed requirements?
We believe that the level of detail is more than sufficient, given that the guidelines should provide guidance to market participants and not add complexity. Moreover, we see an overload of rules, which are often difficult to enforce. In the future, once the institutions have "digested" the new first and second level legislation, if the need to increase the depth and level of detail of the document is detected by the competent authorities, it will be possible to intervene in a targeted manner by updating the guidelines.
Question 24: Do you think the guidelines should provide a common format for the plans required by the CRD? What structure and tool, e.g. template, outline, or other, should be considered for such common format? What key aspects should be considered to ensure interoperability with other (e.g. CSRD) requirements?
We believe that it is desirable to find a common model and format for the plans to be prepared under the CRD, as they go in the direction of increasing standardization and process efficiency.
Question 25: Where applicable and if not covered in your previous answers, please describe the main challenges you identify for the implementation of these guidelines, and what changes or clarifications would help you to implement them.
We believe that providing more examples and use cases can certainly improve the understanding of the document and facilitate the application of the rules by the institutions.
Question 26: Do you have other comments on the draft guidelines?
We highlight the imbalance, in terms of general attention, present in the legislation on environmental issues compared to social and governance ones, even if Article 87 considers them in their entirety.