Last Friday EBA published its action plan on sustainable finance including time-lines for reports, guidelines and technical standards mandated to the EBA. The EBA’s responsibility and mandates can be summarised under following legislative acts.
Given the complexity of the topic and the deadlines given from legislation and the Commission’s action plan, EBA has set up a working sequence, which can be summarised in the categories; strategy and risk management, key metrics and disclosure, stress testing and scenario analysis and prudential treatment.
The most relative initiatives will be delivered between 2019 and 2025 and closely linked with the work which will be done by the Commission, supervisory or industry initiatives.
The EBA encourages institutions to act proactively in incorporating ESG considerations into their business strategy and risk management. One way of conducting the incorporation is to start implementing the recommendations of Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD). The TCFD recommendations were published in 2016 and are supported by several governments and financial authorities with in Europe. The TCFD recommendations are based on four main fragments; governance, strategy, risk management and metrics and target. These four segments cover several parts of EBA’s action plan, especially the upcoming Pillar 3 disclosure requirements.