EBA publishes final guidelines on environmental scenarios analysis

The European Banking Authority has finalised its guidelines on environmental scenario analysis setting out how banks should identify, assess and manage environmental risks as part of their risk management framework. 

The guidelines, published on 5 November 2025, complement the EBA’s January 2025 guidelines on ESG risks management (see our earlier blog post) and form part of the EU’s broader sustainability agenda under the Capital Requirements Directive VI (CRD VI). The EBA consulted on the guidelines in January (see our earlier blog post). 

Objectives

The aim of the guidelines is to create a common reference point to support consistent, forward-looking management of environmental risks across the EU banking sector. The EBA seeks to facilitate consistent risk assessments and promote a forward-looking, comprehensive understanding of environmental challenges. The guidelines are designed to encourage a culture of proactive risk management, enabling banks to anticipate future risks and opportunities related to climate and environmental change.

Features of the guidelines

Applicable from 1 January 2027, the guidelines are built around two key pillars, each with a different time horizon and objective:

• Short-term financial resilience (‘Stress Testing’): This first pillar integrates environmental risk factors into existing stress testing frameworks, allowing banks to assess the short-term financial impacts of environmental risks while ensuring that capital and liquidity levels remain adequate.

• Long-term business model resilience (‘Resilience Analysis’): The second pillar extends the horizon to medium and long-term business model resilience, examining how banks can adapt within an unstable economic-ecological system.  

While initially focused on climate-related risks, future updates of the guidelines may extend coverage to social and governance factors as they become more advanced.

Integration

Banks are advised to develop and implement scenario analysis gradually, with the aim of embedding it in their overall governance and risk management frameworks by, among other things, establishing clear internal scenarios that are endorsed by senior management and applying proportionality, taking into account the size, nature and complexity of the bank’s activities. 

The EBA emphasises that scenario analysis should inform, not dictate, decision-making, and highlights the importance of expert judgement, adaptability and cross-functional collaboration in embedding environmental risk into core risk management processes.

Timeline and implementation 

The EBA has postponed the application date of the guidelines from 11 January 2026 to 1 January 2027 to give banks more time to prepare and integrate the new requirements. Banks are encouraged to begin capacity-building, improved environmental data collection, and strengthen internal modelling in advance of this deadline. 

The final report is available here.

The EBA press release published on 5 November 2025 is available here.