+Annex
---+a. Strategic objectives and roadmap of the plan
---+b. Targets and metrics
---+c. Governance
---+d. Implementation strategy
---+e. Engagement strategy

Annex

This Annex provides a supporting tool for institutions for the development of plans required under Article 76(2) of Directive 2013/36/EU as further specified by Section 6 of these guidelines. It does not introduce additional requirements but provides for each key content required by the guidelines some examples, references and potential metrics that institutions may consider as they structure and formalise their plans. Institutions may adapt the format of this common approach provided they ensure that all required key contents are included in their plans. In line with the need for consistency with other applicable requirements as per section 6.1 and in particular paragraph 85, institutions should ensure consistency of information used to comply with the guidelines with information disclosed in accordance with Directive 2013/34/EU and Commission Delegated Regulation (EU) 2023/2772.

. 6.4 Key contents of plansKey Clarifications words sub-ele-words or elements required key and the Guidelines Clarifying Key with or relevant paragraph(s) mentof the Examples of qualitative and quantitative out- References to other EU content puts and their potential supporting metrics frameworks reference to Potential Output Potential Output Pillar 3 CSRD / ESRS (Qualitative) (Quantitative) How to read this tool? guidance Quantitative description Links towards Pillar 3 and ESRS reference to the Qualitative description of potential output re- requirements that institutions, section(s) or of potential output re- lated to this Guidelines' where applicable, should con- of the lated to this Guide- requirement: sider to ensure consistency and Guidelines lines' requirement: - With examples or interconnections and rely to the

Direct extract from section 6.4, - With examples or ‘ warnings ’ in using met- extent possible on materially

paragraph 109 of the GuidelinesKeywords sub-ele-Key Clarifying or with relevant ment paragraph(s) words or elements content‘ do not forgets ’ , rics and targets, identical or significantly compa-guidance - For example, narra- - For example, recalling rable relevant information. reference to the tives characteristics. the different angles a KPI section(s) or could cover. References to Pillar 3 and ESRS of the All examples are for il- All examples of KPIs / may need to be updated to re-Guidelines lustration only. KRIs are for illustration flect future regulatory develop-only. ments. of the required key Examples of qualitative and quantitative out- References to other EU puts and their potential supporting metrics frameworks
6.4 Key contents of plansClarificationsandreference to the Guide- Potential Output (Qual- Potential Output Pillar 3 CSRD / ESRS lines itative) (Quantitative)

1. Overview

,
a. Strategic objectives and roadmap of the plan
i. High-level overarching stra-tegic objective to address ESG risks in the short, medium and long term, in line with overall business strategy and risk appe-tite.Overarching objective: Short, me-dium and long term:This pertains to the overarch-ing strategic objective institu-tions seek to accomplish con-cerning ESG risks, in line with the incorporation of ESG risks in business and risk strategies and risk appetite in accord-ance with section 5.2 and sec-tion 5.3. This pertains to how the stra-tegic objective applies across the different time horizons considered in accordance with section 6.3.2.# Qualitative description of strategies to ensure the compatibility of business models with the transition to a climate-neutral and sustainable economy, par-ticularly when subject to CSDDD and/or CSRD re-quirements, and how these strategies affect the direction and priorities for ESG risk management ini-tiatives # High-level approaches to manage ESG risks iden-tified as most material given the institution's scope of activities and ma-teriality assessment# Overarching objec-tives could be linked to Qualitative: selected KPI or KRI tar-Table 1 gets ESRS-E1-1 (a) (b) ESRS Table 2 # Cross-reference to ESRS-E1-MDR-P (a) (b) other parts of the plan ESRS-E1-2 Table 3 may be considered e.g. (c) (d) towards part a(ii) or part b2 - BP1
ii. Comprehensive set of long-term goals with intermediate milestones to ensure resilience of the business model towards ESG risks, including consistency of business structure and reve-nues with such milestones.Long term goals: Intermediate milestones: Consistency of business structure and revenues with milestones: Key assump-Long term goals that support the realisation of the over-arching objective over a time horizon of at least 10 years in accordance with the CRD and paragraph 99 of the Guide-lines. Intermediate milestones measuring progress towards long-term goals, in accordance with paragraph 100 of the Guidelines. How the institution will ensure its ability to generate ade-quate profitability along the path. This pertains to the documen-tation of key methodological# Long-term goals to ad-dress risks stemming from the EU objective to achieve net-zero GHG emissions by 2050, with intermediate milestone in 2030 considering the EU objective to reduce emis-sions by 55% compared to the 1990 level # Long-term goals and in-termediate milestones to address risks stemming from EU objectives re-lated to deforestation or nature restoration # How the institution en-sures that its business structure and revenue streams are aligned with its long-term goals and in-termediate milestonesQualitative: # Financial exposure to Table 1 ESRS-E1-1 different economic (b) (j) sectors Table 2 GHG # Portfolio alignment (b) (k) (l) targets: metrics Table 3 E1-4 # Profitability metrics: (c) (d) return and risk ad-justed return indica- Quantita-tors across relevant tive: breakdowns (e.g. sec- Template 1 tors, portfolios, prod- Template 3 ucts...) # Business strategy metrics: forward look-ing KPIs describing the institution's strategy in terms of pricing, capi-tal, liquidity, balance sheet allocation # Percentage of ESG milestones achieved on time # Degree of alignmentreduction ESRS-47
iii. Key assumptions, inputs and background information rel-evant to the understanding of in-stitutions’ objectives and tar-gets, including selection of cen-tral or reference scenario(s) and institutions’ conclusions stem-ming from the outcomes of ma-teriality assessments of ESG risks, portfolio alignment assess-ments and other scenario anal-yses.tions and se-lection of ref-erence sce-nario(s): Outcomes of materiality as-sessment, portfolio alignment as-sessments and scenario anal- y ses:criteria and assumptions in ac-cordance with paragraph 108, including reference scenario(s) selected by the institution in line with section 6.3.1. Key findings and conclusions from materiality assessment, portfolio alignment methods and scenario analyses, con-ducted in accordance with sec-tion 4.# Identification of and jus-tification for scenario(s) selected e.g. from na-tional environmental agencies, Joint Research Center of the EU Commis-sion, IEA, NGFS, IPCC # Qualitative description of material environmental transition and physical risks faced by the institu-t ionor misalignment com-pared to climate-re-Qualitative: lated pathways and/or Table 1 benchmark scenarios (j) (k) (l) for selected sectors Table 2 and/or counterparties (h) (i) (j) ESRS-E1-SBM3 # Quantitative Table 3 ESRS-E1-IRO measures of environ- (d) ESRS-E1-9 mental risk impacts on financial risk categories Quantita-tive: # Quantitative out- Template 3 comes of the material-ity assessment of ESG r isks48
b. Targets and metrics
i. Quantitative targets set to address ESG risks, including those stemming from the pro-cess of adjustment towards the legal and regulatory sustainabil- and ity where wards objectives broader a the sustainable institution transition of the jurisdictions economy, operates trends to-Targets to ad-dress ESG risks and monitor-ing metrics: Risks ming process justment stem- from of to- ad- theThis pertains to the metrics and targets used by institu-tions in accordance with sec-tion 5.7 and section 6.3.4. This pertains to the specific metrics and from cess address of the adjustment and transition targets ESG risks to and to the arising monitor pro- rele-N/A# Exposures towards high-risk sectors or counterparties # Portfolio alignment metrics and targets # Financed emissions across relevant break-downs Qualitative: # Progress achieved in Table 1 key financing strate- (b) (c) gies Table 2 # with ergy # Real Energy certain efficiency estate supply level portfolios of bank- en- (b) Quantita- tive:ESRS-E1-1 GHG targets: E1-4reduction ESRS-
and metrics used to monitor ESG risks and the progress in achiev-ing the targets.wards regula-tory sustaina-bility objec-tives:vant regulatory objectives, such as those included in the EU climate law in accordance with Article 76(2) CRD# For each target, what are the activities, asset classes, sectors and busi-ness lines covered # Institution-level targetsing ratio All tem-# Level of physical risk plates the institution is ex-posed to # Information on the riskiness of the portfo-lio across relevant breakdowns (e.g. non-performing exposures) # Percentage of identi-fied ESG risks that are actively monitored and managed # Percentage of busi-49
ii. Portfolios, sectors, asset classes, business lines and where applicable economic activities (i.e. individual technologies) cov-ered by targets and monitoring metrics, ensuring that the scope of targets and metrics suffi-ciently reflects the nature, size and complexity of institution’s activity and its ESG risks materi-ality assessment.Scope of cov-erage:This pertains to information related to the scope of targets and metrics and its signifi-cance from both a risk and fi-nancial perspective. This pertains to the short, me-broken down into more specific sectoral targets # Targets applied to spe-cific portfolios, exposures, groups of assets or invest-ments that share similar characteristics or risks # Specific, actionable tar-gets for particular pro-jects, technologies, or business activities # On- and off-balance sheet activities captured # Exclusion in coverage and planned coverage # Qualitative description of the set of targets and metrics applied for theness units with ESG risk-related targets in-tegrated into their op-erational plans # Percentage of opera-tions in different re-gions that have ESG risk-related targets and Qualitative: initiatives in place Table 1 # Percentage of sectors (b) (c) (j) that have developed Table 2 specific action plans (h) (i) aligned with group-level ESG risks targets. Quantita-# Achievement of sec- tive: toral targets All tem-plates # Evolution e.g. in-ESRS-E1-1 ESRS Current nues ESRS GHG targets: E1-42 - MDR-T reve-by sectors: 2 - SBM -1 reduction ESRS-
iii. Time horizons over which targets and metrics apply.Time horizons:dium or long-term time hori-zons with which metrics and targets are associated in line with section 6.3.2.short, medium and long term # Justification of short-term increases in metrics and targets, if applicablecrease/decrease in the level of target(s) to be achieved across differ-ent time horizonsESRS-E1.IRO-1_10_ ESRS-E4-1_04 13dAR 12a 50
c. Governance
i. Governance structure forGovernance structure:The governance structure for the plan in accordance with section 6.2.1, section 6.2.2. and section 6.5.# Roles and responsibili-ties of the management body, any sub-committee# Frequency of board meetings dedicated to the plan # Delays in approval of Qualitative: the plan Table 1
the plans including roles and re-sponsibilities for the formula-tion, validation, implementation, monitoring and updating of the plan, including escalation steps in case of deviation from targets.Deviation and escalation procedure:Governance arrangements for decision-taking on remedial actions in case of significant deviations in line with para-graphs 80 and 89. The capacity and resources re-and three lines of defence # Escalation protocol that defines the process for ad-dressing deviations, in-cluding who should be no-tified and the steps to be taken. # Training and develop-# Number of internal (e) (g) (h) audits conducted on (q) the plan Table 2 # Percentage of audit (d) (f) recommendations im- Table 3 plemented (a) # Number of escala-tions processed and/or unresolved escalations # ESG risks-related training completionESRS 2 GOV-1 _AR 4
ii. Capacity and resources-re-lated actions to ensure appropri-ate knowledge, skills and exper-tise for effective implementation of the plan, including ESG risk-related trainings and internal culture.Capacity and resources:lated actions for the effective execution of the plan, based on an initial assessment by the institution of the potential gaps and needs as regards in-ternal culture and capabilities for ESG risks in line with sec-tion 5.4. This pertains to how the insti-ment programs for ESG risks # Hiring and recruitment plans # Knowledge sharing and collaboration platforms # Leadership commitment # Qualitative descriptionrate # Identified gaps in ESG risk-related skills and Qualitative: knowledge Table 1 # Frequency and qual- (f) (m) ity of internal commu-nications regarding ESG risk-related objec-tives and progress # Metrics used to em-Qualitative: bed the risk appetiteESRS 2-GOV-1 - para 23 ESRS G1 GOV-1 - para 5b
iii. Remuneration policies and practices to promote sound management of ESG risks in line with the institution’s objectives and risk appetite.Remuneration policies and practices:tution takes into account its risk appetite in relation to ESG risks as part of its remunera-tion policies and practices in line with Article 74(1)e of CRD. This pertains to the data and systems used for the formula-of how remuneration pol-icies and practices have been, are or will be ad-justed to align with the overarching strategic ob-jective to address ESG risks and with the risk ap-petite # Data inventory with an identification of all rele-vant ESG risk data pointsTable 1 related to ESG risks in (i) remuneration policies Table 2 # Proportion of staff (g) with ESG risk-related Table 3 metrics included in re-(a) muneration # Weighting of ESG-risk related metrics in the overall remuneration # Percentage of rele-vant data points col-lected and available Qualitative:ESRS 2-GOV-2 - para 29 ESRS-E1-GOV-3 51 ESRS 1 Appen-dix B ESRS 2 AR 2 ESRS 2 SBM-
iii. Data and systems used for the transition planning processData and sys-tems:tion, implementation and monitoring of plans in accord-ance with section 4.2.2 and paragraph 93.and assessment of their availability and quality # Policies and procedures to ensure data qualityTable 1 # Percentage of sys- (p) tems and processes that integrate ESG data1_42a ESRS-E2-4_30c ESRS-S1-6_50d ESRS-S1-7_55b
d. Implementation strategy
i. Overview of short-, me-dium-, and long-term actions taken or planned in core banking activities and processes to achieve the plan’s targets, in-cluding how the institution em-information its fectiveness beds framework, its decision-making regular the plan’s or on risk complemented estimated the objectives management observed process contri- into and by ef-Actions taken or planned in core banking activities: Changes the risk ment work: regular manage- frame- toThis pertains to how the insti-tution will implement its ob-jectives and targets through its core activity. This pertains to how the insti-tution into management ICAAP, capital/portfolio budgeting the will ILAAP, mix embed process, of tools RAS, existing allocation, its risk strategic (e.g. targets limits, risk# Implementation of new tools for assessing ESG risks in current portfolios # Integration of ESG risk-related objectives into the medium strategic cision-making # into Incorporating the risk planning and management long-term processes ESG and risks de-Key ERSR-E1-1_16b # Percentage of activi-ties affected by imple-ESRS-E1 mentation actions Qualitative: ESRS Table 1 # Percentage of busi- (n) ESRS-E1-2 ness at plan's # risk Adoption implementing management decisions targets rate that of tools ESG aim the Table (a) Table (c) 2 3 ESRS-E1-3 ------------------- ESRS-E2-E5 ESRS-S1-S4 ESRS-G1 ESRS-E3actions: MDR-A 2 MDR-A MDR-A MDR-A
bution of each action to the rele-vant target(s).Policies and conditions on activities, sec-tors, loca-tions:plan, funding plan, etc), in line w ith section 5. Policies and the conditions that govern them, including updates to existing policies and newly created policies, in line with paragraph 46(b-c).framework # A list of current policies and original ESG risk sta-tus # A roadmap detailing which policies & condi-tions, and their scope, will be updated or created, how, when and by whom # For each policy, the fol-lowing aspects may be in-ESRS-E4 ESRS-E5 # Policy adoption rate, e.g. percentage of branches or depart-ments that have adopted new ESG risks ESRS-E1-1_16b policies ESRS-E1-2 ESRS-E1-3 # Number of times ESG Qualitative:MDR-A MDR-A 52
ii. Adaptations to policies and procedures on financial risk cate-gories and to lending and invest-ment policies and conditions on key economic activities, sectors and locations.Policies and procedures on financial risk categories:This pertains to the adapta-tions made to policies and pro-cedures in accordance with section 5.6. This pertains to how the insti-tution will adapt its mix of ser-cluded: . Goal: how it reflects the strategic objective, risk strategy and supports the implementation of the plan . Scope: precise iteration of business, location, sec-tor etc that are governed and impacted . Conditions: clear criteria ensuring ease of applica-bility and tracking . Exclusions: any exclu-sions in line with risk ap-petite # Risk-based pricing: ad-justing pricing based on the ESG risk profile of therisk policies are re- Table 1 viewed and updated (d) (o) Activities within a given period Table 2 lated (c) (e) in/near # Percentage of opera- Table 3 versity-sensitive tions in compliance ( c) (d) areas: with updated ESG risk ESRS policies 1_19a # Outcomes of internal and external audits fo-cused on ESG risk man-agement framework # Frequency and extent Qualitative: Activities of pricing adjustments Table 1re-to sites biodi-E4.IRO-53 in-
iii. Changes introduced to the mix and pricing of services and products to support the imple-mentation of the plan.Mix and pric-ing of services and products: Sustainability-related and transition-re-lated products and services:vices and products and their pricing based on ESG risk-rele-vant criteria and the institu-tion’s risk strategy and inter-nal capital policy, in line with paragraph 46b. The types of financial instru-ments (green and sustainabil-ity-linked loans, bonds, mort-gages, funds…) and advisory services offered or managedborrower or project # Incentives for risk miti-gation: offering incentives for clients who implement effective ESG risk mitiga-tion strategies # Strategy, policies and criteria on green or transi-tion or ESG-linked mort-gages, loans and bondscompatible based on ESG risk pro- (r) transition: files Table 2 ESRS-E1.IRO-1 # Number of clients (j) taking advantage of in- Table 3 AR12 centive pricing (d) # Growth in sustaina-ble financing: year-to-year growth in the vol-ume and proportion of sustainable financing # Default rate on green or transition or ESG-with
iv. Investments and strategic portfolio allocation supporting the institution’s business strat-egy and risk appetite in relation to ESG risks, including infor-mation on sustainability-related and transition-related products commensurate changes choices and services, are in strategic accompanied risk and management how financing any byConsistency strategic nancing choices with fi- ofby the institution. This tution cides and strategy, pertains to will adapt ensure, to that its how business when those the it insti- de- mix# Diversification of lend-ing and investments port-folios based on ESG risk-relevant criteria e.g. in terms or # green Credit geographical of loans economic risk policies and areas sectors mort- onlinked mortgages or loans Qualitative: ESRS-E1-3 Table 1 (m) (r) ESRS-E4-1 # Proportion of new fi- Table 2 e nanced projects that (e) undergo a comprehen- Outcomes sive ment # decisions Percentage ESG that risk of explicitly assess- credit Quantita- tive: Templates 0 6>10 affected munities: ESRS-S3-4 bAR 1 for com- AR 34
procedures.risk manage-ment proce-dures:changes fit the risk manage-ment arrangements to have in place in accordance with sec-tion 5.gages # How an institution that finances renewable en-ergy projects ensures that the projects comply with environmental regula-tions to avoid legal and reputational risksconsider ESG risks # Profit margins on ESG-related products: comparison of profit margins between ESG-related products and traditional products54
e. Engagement strategy
i. Policies for engaging with counterparties, including information on the frequency, scope and objectives of engage-ment, types of potential actions and escalation processes or cri-teria.Engagement policies:Clear policies that the institu-tion will follow to engage identified counterparties to achieve its strategic and risk management objectives, tak-ing into account outcomes of the materiality assessment and risk measurement meth-ods, in line with paragraph 46a.# Purpose and overall ob-jective e.g. understanding of risk profile and/or checking consistency with risk appetite and targets # Available solutions to counterparty # Escalation and valida-tion process # Due diligence screening to identify high-risk coun-# The percentage of counterparties with which dialogue has been pursued or is Qualitative: planned to be pursued Table 1 # The percentage of (d) (o) counterparties for Table 2 ESRS which an assessment (c) of ESG risks has been Table 3 performed (b) (c) # Proportion of sectors, products and business lines captured # The percentage of counterparties under-going ESG risk due dili-gence # Changes in the credit2-SBM 2
ii. Processes, methodolo-gies and metrics used for collect-ing and assessing information re-lated to counterparties’ expo-sure to ESG risks and alignment towards the institution’s objec-tives and risk appetite.Process, methods and metrics for as-sessing ESG risks:This relates to the institution's application of exposure-based, sector-based, portfolio-based and portfolio alignment meth-ods in line with section 4.2.3. This relates to the outcomes ofterparties based on pre-defined criteria # ESG risks reflected in in-ternal or external scores and/or ratings # Methods for measuring alignment of select coun-terparties against climate pathways # Criteria used to identify counterparties with signif-icant ESG risks that may require immediate atten-tion # Adjustment of credit terms, such as interest rates or collateral require-ments, based on ESG riskratings of counterpar-Qualitative: ties given impact of ESRS-E1.IRO-1 Table 1 ESG risks (k) (l) # Concentration of ex- ESRS-E4-1.AR-Table 2 posures within specific 1a ( i) (k) sectors subject to ele-vated transition or physical risks # Involvement in ESG-related controversies or incidents # Positive (or any sub-classification within that category) or nega-tive (or any sub-classifi-cation within that cate- Qualitative55
iii. Outcomes of engage-ment practices, including an overview of counterparties’ adaptability and resilience to the transition towards a more sus-tainable economy.Outcomes:engagement, allowing for a meaningful interpretation of the risk profile of the counter-parties and actions taken by the institution, in line with paragraph 81e(ii).assessments # Enhanced due diligence, e.g. implementing more rigorous due diligence processes for high-risk counterparties # (More) targeted engage-ment, e.g. developing spe-cific engagement plans to address identified ESG risks, such as setting im-provement targets or of-fering new financial prod-ucts that cater to the needs of counterpartiesgory) assessments of Table 1 these counterparties’ (o) ESRS-E1 resilience and align- Table 2 ESRS ment against the insti- (m) 2_45a tution’s targets and Table 3 risk appetite (c) (d) # Number and types of follow-up actions taken by the institution2 -SBM-AR 16 56

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

Requirements

3. Related Standards

Standards
  • EBA - Published by the European Banking Authority at https://www.eba.europa.eu/