EBA Issues Final ESG Risk Guidelines, Mandating Financial Institutions’ Compliance by 2026

The European Banking Authority (EBA) has released comprehensive guidelines for managing Environmental, Social, and Governance (ESG) risks, with large financial institutions required to comply by January 11, 2026, and small, non-complex institutions by January 11, 2027. The guidelines focus on embedding ESG risks into governance, strategy, and risk management frameworks, with mandatory annual materiality assessments for large institutions and biannual assessments for smaller ones. Institutions must prepare transition plans aligned with EU climate neutrality targets, including net-zero emissions by 2050, and incorporate ESG risks into credit, market, operational, and liquidity risk frameworks. Robust data collection, scenario-based analysis, and sector-specific policies are required, alongside internal governance enhancements and training. The proportionality principle allows simplified approaches for small institutions, while larger ones must adopt detailed methodologies. These measures aim to ensure institutions are prepared to address the interconnected financial risks of climate change, social challenges, and governance issues. Read the full guidelines here. Resources: https://esgnews.com/eba-issues-final-esg-risk-guidelines-mandating-financial-institutions-compliance-by-2026/