The European Banking Authority (EBA) has released comprehensive guidelines to help financial institutions manage Environmental, Social, and Governance (ESG) risks.

These guidelines establish a risk management framework in alignment with key EU regulations, including the Capital Requirements Directive (CRD6), Corporate Sustainability Due Diligence Directive (CSDDD), and Corporate Sustainability Reporting Directive (CSRD). The goal is to prepare financial institutions for the EU’s 2050 climate neutrality target by addressing short-, medium-, and long-term ESG-related risks. The EBA emphasizes the financial sector’s critical role in fostering a sustainable economy and mitigating the economic impact of climate change, biodiversity loss, and environmental degradation.

The guidelines detail requirements for compliance, reporting, scope, and implementation while introducing reference methodologies for identifying, measuring, managing, and monitoring ESG risks. Amendments to the CRD provide expanded definitions and governance guidance for ESG risk management. Institutions are expected to adopt these standards by 11 January 2026, while small and non-complex institutions have until 11 January 2027 to comply. These measures mark a significant step in integrating sustainability into risk frameworks across the European financial system.