In Conversation with Ms Dorota Wojnar (Head of ESG risks unit, European Banking Authority)

1. When and why did your institution join the NGFS?

The European Banking Authority (EBA) joined the NGFS early, in December 2018. At that time sustainable finance was an emerging topic, but it was already clear that risks arising from climate change would need to be considered by the financial sector, and therefore the EBA.

Earlier in 2018, the European Commission had published its first action plan on sustainable finance, with an important role foreseen for the European Supervisory Authorities (EBA, EIOPA, ESMA). The EBA was to assess how to incorporate ESG risks into specific areas, such as bank disclosures, governance, risk management, stress-testing and the supervisory review and evaluation process.

It was clear from the beginning that climate change is a global issue and should be addressed globally. For this reason, we have always supported coordination and consistent efforts across jurisdictions. The EBA and NGFS shared the goals of seeking to enhance the role of the financial system to respond to environmental challenges and manage climate-related financial risks. Joining the NGFS allowed us to both contribute to and benefit from the development of informed and coordinated views on how climate and environmental risk considerations can be incorporated into the regulatory and supervisory framework for financial institutions. It helped us develop our own risk assessment and stress testing capacities.

2. Can you share with us the key elements of the EBA’s climate strategy and how it fits into the broader strategy in your jurisdiction?

The EBA’s key objective is to support the European financial sector – especially, but non only, banks - towards the goal of an orderly transition to a more sustainable economy while mitigating risks stemming from climate change, environmental degradation and broader ESG factors.

Our strategy is aligned with the EU strategy. The EU has committed to ambitious climate and environmental goals, such as achieving net zero greenhouse gas emissions by 2050. Sustainable finance should help reach these objectives, by supporting economic growth while reducing pressures on the environment and considering social and governance aspects. The EU strategy also encompasses transparency and risk management objectives regarding risks related to ESG factors that may have an impact on the real economy and the financial system. The EU sustainable finance regulatory framework has evolved over the last years building on the European Commission’s action plan (2018), renewed strategy (2021), and environmental Omnibus directive (2025).

EBA’s work is to provide adequate tools at the service of the strategy chosen by the EU, in line with our mission to safeguard financial stability. Our role is to ensure that the prudential framework adequately reflects the risks in this area. In 2021, we created a dedicated ESG Risks unit at the EBA, with a focus on collecting evidence that would best support policy discussions at our table as well as with external stakeholders. In 2022, we published EBA’s roadmap on sustainable finance, which  covered the three pillars of the banking prudential framework: we advise on the design of prudential requirements to address ESG risks, we provide guidance for banks and their supervisors on the ESG risk management, governance and supervision, and we specify templates for ESG-related disclosures and supervisory reporting.

In addition, we gradually develop and enhance our own regular risk monitoring capabilities, including climate stress testing. Finally, we support the European Commission in its initiatives related to labelling of green financial products and in addressing greenwashing risk. We also support the implementation of processes by providing transparency and facilitating access to information, including by regular updates of climate risk indicators which financial entities and supervisors can use as a reference.

In taking these initiatives, it is important for us to keep a holistic view, making sure that the ESG risks are addressed across the framework in a comprehensive and consistent manner. Our guiding principle is to specify rules that address material risks in a proportionate manner.

From this perspective, our climate- and broader ESG-related work is driven by the imperative of regulatory efficiency, in line with the EU’s simplification agenda focused on reducing administrative burden and improving the quality of legislation. For us, this means systematically integrating proportionality in our ESG regulatory products, providing clarity where needed on how to practically implement legislative provisions, and ensuring consistency across the framework while avoiding duplications.

3. To which extent did the EBA leverage the work of the NGFS in its own domestic journey? Any concrete examples?

NGFS resources are useful to advance the EBA’s climate and nature-related work. The guidance, analyses, and tools developed by the NGFS enhance our collective understanding on key issues and are frequently used, directly or indirectly, to support the delivery of our tasks.

To give a few examples, we have referred to or made use of NGFS publications in the following aspects of our work:

• Scenario analysis and stress testing: the EBA has developed guidance for both banks and supervisors regarding environmental scenario analysis - as a component of institutions’ risk management - and with respect to the integration of ESG risks when performing supervisory stress tests, respectively. Both sets of guidelines reference the NGFS scenarios, highlighting them as supporting tools for banks and supervisors’ analyses, hence recognizing the quality and relevance of NGFS work in this field. We are closely monitoring developments as we progress on the gradual incorporation of climate risks in the regular EU-wide stress tests.
• Data landscape: we have analysed the availability and accessibility of data used to identify and qualify environmental risks. This analysis has leveraged the NGFS work in this domain, such as the NGFS report on bridging data gaps. The results of this analysis support our further work in the area of ESG-related disclosures and supervisory reporting.
• Greenwashing: the EBA report on greenwashing in which we have analysed greenwashing risk and how it can be addressed has relied as one of the sources on the NGFS stocktaking work on climate litigation trends and developments, in particular drawing insights into litigation cases driven by greenwashing claims.
• Management and supervision of ESG risks: following an initial EBA report on the definition, assessment, management and supervision of ESG risks, we have developed guidance for banks on the incorporation of ESG risks into risk management frameworks and we are finalising updated guidance for supervisors on the treatment of these risks as part of the supervisory review and evaluation process. This is an example of an area in which we both contributed to the work of NGFS and benefited from it. The analysis and recommendations published by the NGFS, such as the Guide for supervisors and the transition plan package were among the reference sources for our work.

We strongly support further developments and work of NGFS in key areas. We see the need for knowledge sharing among authorities, and promoting consistency of approaches across jurisdictions.

4. One last word?

For financial institutions, supervisors, and regulators, mainstreaming environmental risk considerations in core activities certainly comes with challenges, for instance in terms of data, capacity-building or governance, but also in terms of mindset. Environmental challenges and risks are here to stay and they must be managed. This of course should be done in a cost efficient and proportionate manner. The EBA can help conducting robust analysis and providing tools to support the EU financial sector achieving its financial stability and environmental sustainability objectives.