Proposal for a directive
Article 1 – paragraph 1 – point 13 a (new)
(13a) The following Article 84a is added: ‘Article 84a Material ESG-related risks 1. The competent authorities shall ensure that policies and processes for the identification, measurement and management of all material sources and effects of material ESG-specific risks are implemented. 2. For the purposes of paragraph 1, the institution shall identify the following: a) the risks to which the institution is exposed in the short, medium and long terms; b) a description of significant concentrations of credit exposures involving carbon-related assets, if these exposures are material; c) a description of the impact of the material ESG-related risks on the institution’s business, strategy and financial planning, if these risks are material and financial; d) a description of the processes which the institution uses to identify, assess and manage material ESG-related risks; e) the parameters which the institution used to assess the impact of short-, medium- and long-term material ESG-related risks on lending and financial intermediary transactions, if these risks are material. 3. The EBA shall issue guidelines to specify: a) what is meant by a short-term, a medium-term and a long-term time frame; b) what is meant by specific material ESG-related problems which may arise in the short, medium or long term and which could have a material, financial impact on the institution; c) what is meant by physical risks and transition risks; d) what is meant by the processes used to determine which risks could have a material, financial impact on the institution; e) what is meant by a carbon-related asset, consistently with an EU brown taxonomy adopted with the same process as for the EU green taxonomy. The EBA shall publish these guidelines by ... [two years after the entry into force of this Directive]. 4. To assess climate-related risks of banks, the EBA should pilot forward- looking climate scenario analysis on their portfolios, in coordination with relevant ESAs and national regulators.’