Regulation

The European Supervisory Authorities (ESAs), comprising the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA), have today published a crucial set of joint guidelines designed to enhance the resilience of the EU financial system in the face of environmental, social, and governance (ESG) risks. The Joint Guidelines on ESG Stress Testing aim to provide a comprehensive framework for financial institutions across Europe to assess the potential impact of ESG factors on their operations, ensuring a more robust and sustainable financial system. The guidelines, which were developed in collaboration with various stakeholders, outline a standardized approach for conducting ESG stress tests. These tests are intended to help institutions better understand how risks related to climate change, social issues, and governance factors could affect their financial stability under different stress scenarios. The document can be downloaded here.

Overview

This webpage is dedicated to providing information on the latest and most relevant regulatory schemes in the field of climate finance. We focus on the most recent initiatives and guidelines issued by both European and international financial regulation authorities. In addition, we highlight the primary limitations articulated by these regulators.

European Central Bank (ECB)

  • CLIMATE AND NATURE PLAN (2024–2025). This updated action plan expands the ECB’s climate agenda by incorporating nature-related risks for the first time. It outlines three strategic priorities for 2024–2025: supporting a smooth green transition, strengthening the assessment of physical climate risks, and integrating nature-loss-related risks into supervisory and analytical frameworks. The plan reinforces the ECB’s commitment to addressing both climate and environmental degradation in a coordinated manner. (https://www.ecb.europa.eu/ecb/climate/our- climate-and-nature-plan/html/index.en.html)
  • CLIMATE FACTOR (2025). The ECB announced the introduction of a “climate factor” into its collateral framework, to take effect in the second half of 2026. Under this revised approach, assets with higher exposure to transition risks may be subject to valuation adjustments when accepted as collateral in monetary policy operations. This measure aims to safeguard the Eurosystem against potential climate-related shocks and enhance resilience within monetary policy implementation. (https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.pr250729_1~02d753a029.en.html)
  • INDICATOR OF NATURE LOSS ADDED TO DISCLOSURES (2025). In June 2025, the ECB introduced a nature-loss indicator into its climate-related financial disclosures. This new metric forms part of the third disclosure cycle and provides a more granular assessment of environmental exposures, complementing the existing climate-related indicators. The addition enhances transparency regarding nature-related risks and supports a broader understanding of how the ECB’s portfolio evolves in terms of emissions reduction and environmental alignment. ( https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.pr250612~484d529368.en.html )
  • COMMON MINIMUM STANDARDS (2022). The common minimum standards dictate that evaluating climate change risks should adhere to the same rigorous standards of quality and reliability as any other risk factor assessment. These climate change risk assessments must seamlessly integrate into the standard rating process. The standards also outline specific requirements for data sources, methodologies, and processes to be employed. Click on this LINK to access further details.
  • CLIMATE CHANGE INDICATORS (2023). This report from the ECB offers a brief overview of the released indicators, outlines the methodology, and underscores any existing reservations, constraints, and opportunities for future enhancements. The project encompasses three distinct sets of indicators, each addressing various aspects of the subject and being released at different stages of development. Click on this LINK to access further details.
  • ECB POLICY PORTFOLIOS (2023). This report marks the ECB’s inaugural climate-related financial disclosures for its own funds portfolio and the staff pension fund. The disclosures align with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) from the Financial Stability Board (FSB), covering areas like “Governance,” “Strategy,” “Risk management,” and “Metrics and targets.” Additionally, the Euro system has devised a standardized disclosure framework for the “Metrics and targets” category, incorporating minimum standards for each member. The development of this framework took into account suggestions from the Partnership for Carbon Accounting Financials (PCAF) and the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). Click on this LINK to access further details.
  • DISCLOSURE (2023). This report marks the initial disclosure of the carbon footprint associated with these investments, underlining our commitment to transparency and accountability in ECB initiatives. It also outlines our broader strategy for adjusting the ECB  portfolio, the ECB decision-making process for climate-related actions, and the ECB approach to mitigating climate-related risks. Click on this LINK to access further details.
  • CLIMATE INSURANCE RISK (2023). This discussion paper outlines potential measures that should be examined to address the insurance gap and alleviate the climate change-induced catastrophe risks in the EU through insurance coverage and adaptation strategies. These actions are meant to work alongside proactive mitigation policies aimed at combating climate change and diminishing the related catastrophe risks. They are not intended as a replacement for such policies. Click on this LINK to access further details.
  • ROAD MAP (2021). The Governing Council of the European Central Bank (ECB) has approved an extensive action plan and an ambitious roadmap (refer to the annex) to enhance the integration of climate change considerations within its policy framework. Through this decision, the Governing Council emphasizes its dedication to consistently incorporate environmental sustainability factors into its monetary policy. This choice comes in the wake of the strategy review conducted in 2020-21, during which the assessment of climate change and environmental sustainability played a pivotal role. Click on this LINK to access further details.
  • LOW CARBON TRANSITION (2023). This is article an article included in the ECB Economic Bulletin  that offers an evaluation of how an increased carbon pricing trajectory can influence the macroeconomy while facilitating the shift toward a low-carbon economy. The primary focus is on the euro area. To tackle the substantial uncertainty associated with estimating the effects of elevated carbon pricing, this assessment draws upon a range of macroeconomic models. As part of the ECB’s climate change strategy, this set of models incorporates both newly created ones and those obtained from external sources. Click on this LINK to access further details. The study starts on page 83.

European Banking Authority (EBA)

  • GUIDELINES ON THE MANAGEMENT OF ESG RISKS (2025). These final guidelines set out a structured framework for how institutions should identify, assess, manage, and monitor ESG risks, with a particular emphasis on climate-related transition and physical risks. They clarify supervisory expectations under CRD VI and establish implementation timelines that differentiate between large institutions and small/non-complex entities. The guidelines represent a significant step toward embedding ESG risk management into standard risk governance practices across the EU banking sector. ( https://www.eba.europa.eu/publications-and-media/press-releases/eba-publishes-its-final- guidelines-management-esg-risks )
  • KEY INDICATORS ON CLIMATE RISK IN THE EU/EEA BANKING SECTOR (2025). This publication provides a harmonised set of climate-risk indicators derived from banks’ Pillar 3 ESG disclosures. The dashboard highlights material exposures to high impact sectors and offers comparable metrics on transition and physical risks. The report also identifies persistent data gaps and methodological inconsistencies, underlining the need for further improvements in disclosure quality across institutions. ( https://www.eba.europa.eu/publications-and-media/press-releases/eba- publishes-key-indicators-climate-risk-eueea-banking-sector )
  • CONSULTATION ON AMENDED DISCLOSURE REQUIREMENTS FOR ESG RISKS, EQUITY EXPOSURES AND SHADOW BANKING ENTITIES (2025). This consultation proposes revisions to the Pillar 3 disclosure framework under CRR III, expanding the scope of ESG risk reporting to all institutions. It aims to enhance transparency on equity exposures and aggregated exposures to shadow banking entities, while introducing transitional arrangements to support implementation. The proposal seeks to strengthen market discipline by improving the breadth and comparability of ESG-related disclosures. ( https://www.eba.europa.eu/publications-and- media/press-releases/eba-launches-consultation-amended-disclosure-requirements-esg-risks-equity- exposures-and-aggregate )
  • MAPPING CLIMATE RISK (2021). The report’s objective is to chart the extent of banks’ exposure to risk and shed light on the environmentally friendly assessment endeavors that banks have undertaken up to this point. The discoveries offer a distinct view of the deficiencies in banks’ data and underscore the importance of addressing these gaps promptly for a successful and seamless shift toward a low-carbon economy. Click on this LINK to access the document.
  • GREEN LENDING (2022). The European Banking Authority (EBA) launched an industry survey to receive input from credit institutions on their green loans and mortgages as well as market practices related to these loans. The purpose of the survey is to collect both quantitative and qualitative information the EBA can use to advise the European Commission. Click on this LINK to access the document.
  • PRUDENTIAL DISCLOSURES ON ESG (2022). This report introduces the EBA’s ultimate draft Implementing Technical Standards (ITS) concerning ESG risk disclosures in Pillar 3. These ITS offer tables, templates, and accompanying guidelines that specify the requirements outlined in Article 449a of Regulation (EU) No 575/2013, also known as the Capital Requirements Regulation (CRR). These requirements mandate the disclosure of prudential information related to environmental, social, and governance (ESG) risks, encompassing transition and physical risks. This obligation applies to large institutions whose securities are traded on regulated markets within any Member State. Click on this LINK to access the document.
  • GREENWASHING (2023). In May 2022, the European Supervisory Authorities (ESAs) received a request from the European Commission to address the issue of greenwashing. They were asked to provide input on various aspects, including understanding greenwashing, identifying its types and occurrences, assessing the risks it poses to financial sector entities, investors, and consumers, sharing supervisory practices and capacities to combat greenwashing, and highlighting issues in the current legislative framework.

 

This Report issued by the EBA is their response to this request, offering an initial assessment of the situation. This report is a foundation for the Final Report, expected in May 2024. The findings are based on input from stakeholders through a call for evidence and a survey conducted among competent authorities. Click on this LINK to access the document.

  • EBA ROADMAP (2022). This roadmap delineates the EBA’s agenda for sustainable finance and Environment, Social, and Governance (ESG) risks. It extends and supersedes the EBA’s initial action plan on sustainable finance released in December 2019. The roadmap elucidates the EBA’s strategy and goals concerning ESG and details the responsibilities and assignments received from EU lawmakers and the European Commission, as well as the EBA’s scheduled activities and timelines associated with them. Click on this LINK to access the document.


European Securities and Market Authority (ESMA)

  • ASSESSING PORTFOLIO EXPOSURES TO CLIMATE PHYSICAL RISKS (2024). This ESMA report analyses how financial portfolios are analysing enforcement trends and disclosure behaviours across EU listed companies. (https://www.esma.europa.eu/sites/default/files/2025-10/ESMA32- 2064178921-9254_Public_Statement_-_2025_European_Common_Enforcement_Priorities.pdfion channels and highlights persistent data gaps that limit comparability across institutions. The findings are particularly relevant for researchers studying risk quantification, portfolio stress testing, and market vulnerabilities under climate-intensifying scenarios. (https://www.esma.europa.eu/sites/default/files/2024-10/ESMA50-524821- 3468_Assessing_portfolio_exposures_to_climate_physical_risks.pdf )
  • REPORT ON 2024 CORPORATE REPORTING ENFORCEMENT AND REGULATORY ACTIVITIES (2025). This report reviews how European issuers incorporated climate-related risks into financial statements during the 2024 reporting cycle. ESMA identifies weaknesses in the integration of climate-related assumptions into expected credit loss (ECL) modelling and points out inconsistencies between sustainability disclosures and financial information. The conclusions offer valuable insights for research on disclosure quality, transparency, and the interaction between climate risks and financial accounting. (https://www.esma.europa.eu/sites/default/files/2025-04/ESMA32-193237008- 8791_Report_on_2024_Corporate_reporting_enforcement_and_regulatory_activities.pdf )
  • EUROPEAN COMMON ENFORCEMENT PRIORITIES FOR 2025 CORPORATE
    REPORTING (2025). ESMA’s 2025 enforcement priorities place strong emphasis on the alignment between sustainability statements prepared under ESRS and the financial statements. The statement highlights supervisory focus on materiality assessments, climate-related impacts, narrative completeness, and consistency between climate metrics and financial estimations. This document provides a structured foundation for analysing enforcement trends and disclosure behaviours across EU listed companies. (https://www.esma.europa.eu/sites/default/files/2025-10/ESMA32- 2064178921-9254_Public_Statement_-_2025_European_Common_Enforcement_Priorities.pdf )
  • GREENWASHING (2023). The European Supervisory Authorities (EBA, EIOPA, and ESMA – ESAs), ESAs, have released their Progress Reports on Greenwashing in the financial sector today. You can find the EBA, EIOPA, and ESMA reports. In these reports, the ESAs present a shared, high-level definition of greenwashing that applies to market participants across their respective areas of responsibility, including banking, insurance, pensions, and financial markets. The ESAs define greenwashing as a practice in which statements, declarations, actions, or communications related to sustainability do not transparently and accurately represent the actual sustainability profile of an entity, a financial product, or financial services. This practice has the potential to mislead consumers, investors, and other participants in the market. Click on this LINK for further details.
  • DISCLOSURES (2023). The purpose of this report is to support and improve issuers’ capacity to offer more comprehensive disclosures and establish greater uniformity in the treatment of climate-related issues in financial statements prepared according to IFRS. The report specifically addresses disclosures concerning climate-related topics in the 2022 annual financial statements of non-financial corporate issuers in Europe. Nonetheless, it’s important to note that this report does not establish best practices or dictate the specific method for disclosing climate-related matters in financial statements. Click on this LINK to access the document.
  • ROAD MAP (2023). ESMA released an implementation schedule on February 21, 2022, covering various EU sustainable finance regulations, including the Taxonomy Regulation, SFDR, the Corporate Sustainability Reporting Directive (CSRD), MiFID, the Insurance Distribution Directive, the UCITS Directive, and AIFMD. This document could serve as a valuable reference due to the multitude of interconnected initiatives it encompasses.  Click on this LINK to access the document.
  • GREENIUM (2023). This article extends the analysis to encompass all categories of environmental, social, and governance (ESG) bonds. It identifies a range of significant factors that could potentially explain the greenium phenomenon. This topic holds relevance for multiple aspects of ESMA’s responsibilities. Firstly, it directly contributes to our comprehension of investor preferences within the realm of sustainable finance. Secondly, it aids in the examination of any pricing discrepancies among similar debt instruments, which, if left unaddressed, could potentially impact market stability. Lastly, it aligns with ESMA’s strategic focus on monitoring ESG market advancements and evaluating novel financial instruments. Click on this LINK to access the document.


Explore Further

For comprehensive information on the most up-to-date regulatory schemes, we encourage you to visit the official websites of the respective regulatory authorities. Stay informed about the evolving landscape of climate finance and sustainability.

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