4.2. Governance

When developing and implementing environmental scenario analysis, institutions should apply governance arrangements in accordance with the EBA Guidelines on Internal Governance²⁷ and the EBA Guidelines on the management of ESG risks. Institutions should set up a process to ensure the robustness of the common narrative and scenarios used across their business lines and ensure that these narratives and scenarios are regularly reviewed, especially in the case of significant changes in the business environment.

²⁷ The EBA Guidelines on internal governance under Directive 2013/36/EU (the EBA/GL/2021/05).

To enhance the consistency of the assumptions and estimates made across business functions as well as to ensure that the outcomes of scenario analyses are relevant and exploitable by existing processes, institutions should develop a cross-functional approach. Such collaboration among multiple departments should ensure that expertise and insights from various functions contribute to a comprehensive and robust scenario analysis framework. Institutions should substantiate and document their scenario analyses, including scenario and modelling choices, assumptions made, proxies used to cope with data gaps, factors included or excluded, as well as the main results and conclusions reached.