A common rulebook for ESG stress testing
In early January, the European Supervisory Authorities, the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA), published joint guidelines on environmental, social and governance (ESG) stress testing for national banking and insurance supervisors.
The document is deliberately practical. It sets out how supervisors can fold ESG risks into established stress testing frameworks, and how to run complementary assessments when the usual tools do not quite reach.
The final report follows a public consultation and lands on a timetable set by the Capital Requirements Directive and Solvency II. Next, national competent authorities face a comply or explain process, and translations are due to be published in all EU languages later this quarter.
The ESAs are careful not to invent new stress test obligations, but they are sharpening the supervisory use case. We see this as a reminder that comparability and quality matter most when supervisors start modelling impacts, and that better structured disclosures make that work faster and more reliable as methodologies and data improve.
The final report and guidelines are available here.
