Source: flickr,com

The European Banking Authority, a Paris-based EU regulatory agency tasked with implementing a standard set of rules to regulate and supervise banking across all EU countries, yesterday published its roadmap on sustainable finance.

This document?outlines the agency’s plan for sustainable finance and replaces the previous EBA action plan released in Dec. 2019. The roadmap explains EBA’s objectives and the timeline for achieving them. According to the EBA’s website, the goal of the document is to integrate the consideration of environmental, social, and governance (ESG) risks into the European banking framework and further the EU’s goal of transitioning to a more sustainable economy.

The document identifies environmental problems and climate change among the key risk factors to the sustainable development of the global and European economies. The roadmap emphasizes the need to transition to a greener, less carbon-intensive, resource-efficient economy and inclusive society as challenges that will have a large impact on the financial sector worldwide.

The EBA states its intention to make sure that the risks it identified are integrated into organizational risk management strategies and supervision, including via further developments on climate stress tests. The regulator also considers amending its existing rules on the prudential treatment of exposures by including social and environmental considerations.

The agency also notes that the roadmap only indicates EBA’s current expectations on specific objectives and timelines. These can be amended in the future depending on the new laws adopted by the EU.