EBA publishes Guidelines on Environmental Scenario Analysis

The European Banking Authority (EBA) has released its final Guidelines on environmental scenario analysis, which complement the existing guidelines on the management of ESG risks. The document clarifies how institutions should carry out analyses assessing the anticipated impact of environmental factors – primarily climate change – on their operations.

The aim of the Guidelines is to strengthen institutions’ ability to apply a forward-looking approach when assessing risks and potential impacts arising both from climate change and from the transition to a low-emission economy.

Two key elements of the new requirements

EBA structures the Guidelines around two complementary areas of analysis:

1. Integrating environmental factors into stress-testing frameworks

Institutions will be required to incorporate the impact of climate change into their existing stress tests. In practice, this means:

• assessing the short-term effects of environmental events (e.g. extreme weather, changes in energy prices, new regulations),
• ensuring that capital and liquidity levels remain adequate even under adverse market conditions.

2. Assessing long-term resilience to environmental change

The second element concerns evaluating how evolving environmental and regulatory conditions may affect institutions’ activities over the medium- and long-term. This includes:

• assessing the sustainability of the business model,
• analysing potential changes in the risk profile,
• identifying both threats and new business opportunities arising from the climate transition.

Common standards for the EU banking sector

These two areas are intended to help institutions integrate environmental considerations into daily risk-management processes and strategic planning. The Guidelines also establish a unified standard for institutions and supervisory authorities across the European Union.

Application date and legal basis

The Guidelines will apply from 1 January 2027.
They form part of the broader EBA strategy on sustainable finance and the implementation of the EU banking package.

EBA Focuses on ESG: Get Ready for Environmental Scenarios

The new EBA guidelines require banks and financial institutions to factor in the impact of climate change in stress tests and business resilience analyses.

Want to stay ahead of the regulations? Contact us – we’ll help you implement effective ESG practices and environmental scenario planning.