The European Supervisory Authorities (ESAs) have launched a public consultation on draft guidelines aimed at standardising the integration of environmental, social and governance (ESG) risks into stress testing frameworks for banks and insurers. The consultation is open until 19 September 2025.
Announced on 27 June, the joint initiative by the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA) seeks to harmonise supervisory methodologies across the European Union in line with the Capital Requirements Directive and the Solvency II Directive.
The proposed guidelines, developed by the ESAs’ Joint Committee, lay out a common framework for embedding ESG considerations into financial stress tests. The guidance covers key areas including organisational structures, governance protocols, data management systems, and the development of scenario analysis. Supervisory authorities would be expected to ensure they have sufficient expertise, reliable access to ESG data, and appropriate timelines for conducting assessments.
The guidelines are designed to be adaptable, allowing for future enhancements in ESG stress testing techniques and the evolution of relevant data sources. The overarching goal is to establish a robust, proportionate, and consistent approach to ESG risk analysis across Europe’s financial sector.
Stakeholders are invited to submit feedback via an online survey. Responses will be made public on the ESAs’ websites unless confidentiality is explicitly requested. The consultation marks a significant step in strengthening the EU’s regulatory response to climate and social risks in the financial system, ahead of formal adoption of the final guidelines.
