- The draft technical standards provide a framework for ESG
disclosures to ensure stakeholders are informed about ESG exposures and
strategies and can make informed decisions and exercise market
discipline.
- The standards put forward comparable disclosures and KPIs,
including a green asset ratio, as a tool to show how institutions are
embedding sustainability considerations in their risk management,
business models and strategy and their pathway towards the Paris
agreement goals
- The EBA has developed the Consultation paper in parallel and
consistently with its advice to the EU Commission on ESG disclosures
under the EU taxonomy, including a proposal for a Green Asset ratio
(GAR).
The European Banking Authority (EBA) published today a
consultation paper on draft implementing technical standards (ITS) on
Pillar 3 disclosures on Environmental, Social and Governance (ESG)
risks. The draft ITS put forward comparable disclosures that show how
climate change may exacerbate other risks within institutions’ balance
sheets, how institutions are mitigating those risks, and their green
asset ratio on exposures financing taxonomy-aligned activities, such as
those consistent with the Paris agreement goals.
Disclosure of information on ESG risks is a vital tool to promote
market discipline, allowing stakeholders to assess banks’ ESG related
risks and sustainable finance strategy.
In line with the requirements laid down in the Capital Requirements
Regulation (CRR), the draft ITS proposes comparable quantitative
disclosures on climate-change related transition and physical risks,
including information on exposures towards carbon related assets and
assets subject to chronic and acute climate change events. They also
include quantitative disclosures on institutions’ mitigating actions
supporting their counterparties in the transition to a carbon neutral
economy and in the adaptation to climate change. In addition, they
include a GRA, which identifies the institutions’ assets financing
activities that are environmentally sustainable according to the EU
taxonomy, such as those consistent with the European Green Deal and the
Paris agreement goals. Finally, the draft ITS provide qualitative
information on how institutions are embedding ESG considerations in
their governance, business model and strategy and risk management
framework.
The EBA has integrated proportionality measures that should
facilitate institutions’ disclosures, including transitional periods
where disclosures in terms of estimates and proxies are allowed.
Consultation process
Comments to this consultation can be sent to the EBA by clicking on
the "send your comments" button on the consultation page. Please note
that the deadline for the submission of comments is 1 June 2021. All
contributions received will be published following the end of the
consultation, unless requested otherwise.
A public hearing will be organised in the form of a webinar on
26 March from 11:30 to 13:30 CET. The EBA invites interested
stakeholders to register using this link.
The dial-in details will be communicated in due course.
Legal basis and background
Article 434a of the Capital Requirements Regulation (CRR) mandates
the EBA to develop draft implementing technical standards specifying
uniform disclosure formats, and associated instructions in accordance
with which the disclosures required in Part eight of the CRR shall be
made. Those uniform formats shall convey sufficiently comprehensive and
comparable information for users of that information to assess the risk
profiles of institutions.
The ITS will amend the final draft ITS on institutions’ public disclosures with
the strategic objective of defining a single, comprehensive Pillar 3
framework under the CRR that should integrate all the relevant Pillar 3
disclosure requirements. This will facilitate institutions’
implementation and enhance clarity for users of such information, as
expressed in the EBA Pillar 3 roadmap.
When developing these proposals, the EBA has built on the Financial
Stability Board Task Force on Climate-related Financial Disclosures
(FSB-TCFD) recommendations, the Commission’s non-binding guidelines on
climate-change reporting, and on the EU Taxonomy. The EBA has developed
this consultation paper in parallel and consistently with the Advice to the Commission on disclosures under Article 8 of the Taxonomy Regulation, including a common proposal for a GAR.