+Guidelines on ESG scenario analysis (EBA/GL/2025/04)
---+1. Compliance and reporting obligations
------+1.1. Status of these Guidelines
---------+1. This document contains Guidelines issued pursuant to Article 16 of Regulation (EU) No 1093/2010 …
---------+2. Guidelines set the EBA view of appropriate supervisory practices within the European System of …
------+1.2. Reporting requirements
---------+3. According to Article 16(3) of Regulation (EU) No 1093/2010, competent authorities must notify …
---------+4. Notifications will be published on the EBA website, in line with Article 16(3). FINAL REPORT ON …
---+2. Subject matter, scope and definitions
------+2.1. Subject matter and scope of application
---------+5. These Guidelines specify the criteria for setting the scenarios that institutions should use to …
---------+6. These Guidelines also specify how climate-related risk factors should be integrated into a …
---------+7. These Guidelines complement the EBA Guidelines on the management of ESG risks (the …
---------+8. In addition, these Guidelines further specify how institutions, which have received the …
---------+9. The scope of the Guidelines is focused on environmental risks with priority given to climate as …
---------+10. Institutions and competent authorities should apply these Guidelines in accordance with the …
------+2.2. Addressees
---------+11. These Guidelines are addressed to competent authorities as defined in Article 4(2), point (i) …
------+2.3. Definitions
---------+12. Unless otherwise specified, terms used and defined in Directive 2013/36/EU, Regulation (EU) No …
---+3. Implementation
------+3.1. Date of application
---------+13. These Guidelines apply from 1 January 2027. FINAL REPORT ON GUIDELINES ON ENVIRONMENTAL …
---+4. Purpose, governance and proportionality in environmental scenario analysis
------+4.1. Purpose
---------+14. Institutions should develop forward-looking approaches and perform scenario analyses to manage …
---------+15. When performing scenario analysis, institutions should ensure clarity in the purpose …
---------+16. From the outset, institutions should define a credible and coherent narrative that describes …
---------+17. Institutions should develop and implement scenario analysis gradually, with the aim of …
------+4.2. Governance
---------+18. When developing and implementing environmental scenario analysis, institutions should apply …
---------+19. To enhance the consistency of the assumptions and estimates made across business functions as …
------+4.3. Proportionality
---------+20. Institutions should focus their scenario analyses on material environmental risks. To carry out …
---------+21. The degree of sophistication, scope and frequency of the scenario analysis should be …
---+5. Development of environmental scenario analysis
------+5.1. Transmission channels
---------+22. Institutions should identify, through observation and judgement, the most relevant transmission …
---------+23. Institutions should identify reliable data sources, apply transparent methodologies, and …
---------+24. To identify environmental transmission channels, institutions should identify relevant risk …
---------+25. Institutions should assess the extent to which their counterparties may be indirectly exposed …
---------+26. According to the time horizon of the analysis, institutions should consider potential risk …
---------+27. Institutions should assess how transition and physical environmental risks propagate through …
------+5.2. Scenarios
---------+28. When setting scenarios involving environmental risks, institutions should consider …
---------+29. For climate risks, the additional following factors should be considered: a. climate policies …
---------+30. For other environmental risks (beyond climate), the additional following factors should be …
---------+31. Institutions should use credible scenarios, based on the most recent scientific knowledge, and …
---------+32. Institutions should refine and customise the chosen scenarios based on the objective, scope and …
---------+33. Institutions should ensure that the scenarios are well aligned with the unique risk …
---------+34. Where a scenario does not include some of the elements listed in paragraphs 29 and 30 …
---------+35. When setting scenarios, institutions should consider both physical risk and transition risk. …
---------+36. Institutions should select the specific aspects of transition risk and physical risk hazards to …
---------+37. Institutions should ensure that scenarios are internally consistent. In particular, the …
---------+38. In application of the proportionality principle, institutions may initially, or depending on …
------+5.3. Sensitivity analysis
---------+39. In developing scenario analysis, institutions may consider using sensitivity analysis as a …
---------+40. Additionally, institutions may use sensitivity analysis to explore emerging risks (e.g. nature …
---+6. Types of environmental scenario analysis
------+6.1. Stress tests
---------+41. Institutions should incorporate environmental factors into their stress testing framework …
---------+42. In accordance with Article 177(2) and (2a) of Regulation (EU) No 575/2013, institutions using …
---------+43. For the purposes of their stress testing exercise, institutions should use a baseline scenario …
---------+44. When defining their baseline scenario, institutions should assume a continuation of current …
---------+45. For the set of adverse scenarios, institutions should consider environmental shocks as shocks …
---------+46. When incorporating environmental variables into their existing stress testing framework …
---------+47. To facilitate a smooth integration of the environmental variables, institutions may need to …
---------+48. Institutions should ensure that industry sector and country or geographical location dimensions …
---------+49. Where possible and taking into account their materiality assessment, institutions should apply …
---------+50. Institutions may use a constant balance sheet assumption, but are encouraged to incorporate, as …
---------+51. Institutions should progressively incorporate environmental factors into their stress testing …
---------+52. By way of derogation from paragraph 15 of the EBA Guidelines on institutions’ stress testing …
------+6.2. Resilience analysis
---------+53. Institutions should build their resilience analysis with a view to assessing their capacity to …
---------+54. As a starting point for resilience analysis, institutions should carry out a thorough analysis …
---------+55. On this basis, institutions should set their own scenario of reference, i.e. the scenario which …
---------+56. In addition to the reference scenario, institutions should also select a set of distinct …
---------+57. When performing resilience analysis, institutions should consider the feedback loops stemming …
---------+58. In parallel to this thorough analysis of their environment, institutions should identify key …
---------+59. Combining this analysis of the sources of profitability of their business model and their …
---------+60. Institutions should break down the analysis into several time horizons, while ensuring …
---------+61. For resilience analysis, institutions should use a constrained dynamic portfolio assumption …
---------+62. Resilience analysis should provide institutions with an assessment of the viability of their …
------+6.3. Ongoing monitoring and expert judgment
---------+63. To enhance the robustness of their models, institutions should consider challenging their …
---------+64. To address the residual shortcomings of their stress test models, institutions should consider …
---------+65. More generally, institutions should use expert judgement when carrying out quantitative …
---------+66. Institutions should ensure regular monitoring of significant developments in their environment …
---------+67. Scenario analysis should be designed with adaptability and modularity in mind to allow for …
---+Annex: list of potential transmission channels that institutions may consider
------+For transition risks:
------+For physical risks:
 English - European Union - Financial Industry -

Guidelines on ESG scenario analysis (EBA/GL/2025/04)

Guidelines on ESG scenario analysis (EBA/GL/2025/04)

https://www.eba.europa.eu/activities/single-rulebook/regulatory-activities/sustainable-finance/guidelines-esg-scenario-analysis – PDF

1. Overview

,
1. Compliance and reporting obligations

1. Compliance and reporting obligations
2. Subject matter, scope and definitions

2. Subject matter, scope and definitions
3. Implementation

3. Implementation
4. Purpose, governance and proportionality in environmental scenario analysis

4. Purpose, governance and proportionality in environmental scenario analysis
5. Development of environmental scenario analysis

5. Development of environmental scenario analysis
6. Types of environmental scenario analysis

6. Types of environmental scenario analysis
Annex: list of potential transmission channels that institutions may consider

Annex: list of potential transmission channels that institutions may consider

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/