90. For the purposes of integrating ESG risks across the three lines of defence in line with …

For the purposes of integrating ESG risks across the three lines of defence in line with Section 5.4:

a) the first line of defence should be responsible for establishing a dialogue with counterparties about their own transition strategies and assessing consistency with the institution’s objectives and risk appetite, based on clear engagement policies as set out in paragraph 109 e(i). To this end, institutions should ensure that relevant staff possess sufficient expertise and capabilities to assess the extent to which the transition strategies of counterparties, including their transition plans where available, will enhance their resilience to ESG risks and align with the institution’s targets;
b) the risk management function should ensure that the risk limits set in the risk appetite statement as part of the risk management framework are consistent with all aspects of the institution’s plan, including sectoral policies ;
c) the IAF should review the institution’s plan as part of the risk management framework and assess whether it complies with legal and regulatory requirements and whether it is consistent with the risk strategy and risk appetite of the institution as regards ESG risks. To this end, the IAF should consider whether the plan allows the institution to detect and address changes in its risk profile, how the institution addresses deviations from its targets, and whether the underlying assumptions, methodologies and criteria have been selected and used with integrity.

6.2.2 Internal processes and capacity

1. Overview

Summary	Regulation

Requirements
Source	Requirement

Standards
Source	Requirement