The EBA publishes its final Guidelines on environmental scenario analysis

The European Banking Authority (EBA) today published its final Guidelines on environmental scenario analysis, which complement the EBA Guidelines on the management of Environmental, Social and Governance (ESG) risks by specifying supervisory expectations regarding how institutions should conduct environmental scenario analysis.

The Guidelines aim to strengthen institutions’ ability to use forward-looking approaches to the assessment and management of environmental risks.

The Guidelines are built around two complementary pillars:

• integration of environmental risks into institutions’ existing stress-testing frameworks, enabling banks to assess the short-term financial impacts of environmental risks and ensure that capital and liquidity levels remain adequate; and
• resilience analysis, looking further ahead to evaluate the medium- to long-term implications of environmental risks and opportunities for banks’ business models, strategies, and risk profiles.

Together, these two elements will help institutions to embed environmental risk considerations more effectively into their overall risk management and strategic planning processes. They also provide a common reference point to support consistent, forward-looking management of environmental risks across the EU banking sector.

The Guidelines will apply from 1 January 2027.

Legal basis and background

The Guidelines, like the Guidelines on the management of ESG risks, are based on Article 87(a)5 of the Capital Requirements Directive (CRD6). They also fulfil Article 177 (2a) of the Capital Requirements Regulation (CRR3).

The Guidelines on environmental scenario analysis form part of the EBA’s roadmap on sustainable finance for the integration of ESG risks into the prudential framework and fit within the broader roadmap on the implementation of the EU banking package,