The EACB welcomes the opportunity to comment on the draft joint Guidelines on integrating ESG risk considerations into stress testing. The proposed framework should be proportionate and practical, keeping data and procedural requirements realistic and aligned with banks’ operational capacities.
We recommend that the Guidelines better clarify how ESG stress tests will be integrated with existing prudential and macroprudential exercises of the ECB and EBA. Standardised climate scenarios (e.g., NGFS) should be used for comparability and robustness. Authorities should also acknowledge the lack of operational, social and governance scenarios and run pilot exercises to develop methodologies gradually.
We believe that further clarification is needed on how the results of ESG stress tests will be used within existing prudential supervisory processes, such as the Supervisory Review and Evaluation Process. Such clarifications would help align expectations between authorities and participants, facilitating the effective integration of ESG risks into regular supervisory processes.