ESAs final joint guidelines for ESG stress testing | A&O Shearman

The European Supervisory Authorities (ESAs, comprising the European Banking Authority, European Insurance coverage and Occupational Pensions Authority and the European Securities and Markets Authority) has revealed a final report with joint tips for integrating environmental, social and governance (ESG) dangers into monetary stress assessments for banks and insurers. These tips, mandated by the Capital Necessities Directive (CRD) and the Solvency II Directive, goal to harmonise how competent authorities throughout the EU constantly incorporate ESG dangers into their supervisory frameworks.

Following suggestions to the June consultationthe ESAs refined the drafting however didn’t change the general construction or method. Notable amendments embody: clarifying the materiality evaluation to make it extra ahead wanting and never restricted to relative publicity measures; enhancing proportionality language; growing the time horizon to 10 years for or a extra ahead wanting and complete materiality evaluation of ESG dangers for competent authorities to establish; and different minor changes. The rules shall be translated into all official languages of the EU in Q1 and revealed on the ESAs’ web sites. The deadline for competent authorities to inform the respective ESA whether or not they comply or intend to adjust to the rules shall be two months after the publication of the translated tips. The joint tips apply from 1 January 2027.

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