EBA’s Pillar III Disclosures on ESG Risks for EU Banks: Overview and Timeline
This commentary focuses on providing an overview and timeline of the different Pillar III disclosures regarding ESG risks that European Banks are required to disclose starting from 2023 and onwards.Key points include:
• Starting in 2023, the EBA requires banks to disclose their first set of annual disclosures on ESG risks with data as of the end of 2022, including physical and transition risks as defined by EU regulation.
• In addition to the quantitative templates on physical and transition risks, European banks also need to disclose qualitative ESG metrics starting in 2023. These metrics aim to provide insight and transparency on how well the banks have incorporated ESG risks into their business strategies and governance structure.
• By 2024, European Banks need to disclose their Green Asset Ratio and total Scope 3 emissions.
“The Pillar 3 disclosures on ESG risks will allow easier comparison, identification and analysis of banks’ exposures to sectors and geographies that are vulnerable to climate change”, notes Charlotte Cervin, Senior Analyst, European Financial Institutions at DBRS Morningstar. “In turn, these disclosures should facilitate the incorporation of quantitative ESG factors into credit ratings over time. Nevertheless, we do not expect any credit ratings to be impacted in the short-term.”
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