ESG RISKS MANAGEMENT

Analysis of EBA’s view on ESG Risks Management

Financial institutions and companies are facing mounting pressures from environmental organizations (activists, NGOs, etc.) to be more accountable for their actions.

Besides, we have been witnessing the development of a new wave of European regulations (CRR2/CRR3, Green Taxonomy, SFDR, MIFID II, ESG, etc.) aimed at transforming economic activities toward a greener and a more sustainable economy, and to enhance the resilience of the financial sector against ESG risks in accordance with the European Commission’s Action Plan.

Therefore, the European Banking Authority (henceforth, EBA) stresses the necessity to enhance the incorporation of ESG risks into credit institutions’ and investment firms’ business strategies and processes. (EBA, report 2021). Consequently, credit institutions and investment firms are compelled to address ESG risks in an all-inclusive manner when incorporating them into their risk business strategies and building them into their management frameworks.