AFM publishes report on ESG engagement by Dutch asset managers
On 30 June, the Dutch Authority for Financial Markets (AFM) published an occasional paper (also in Dutch) on the role of engagement on ESG topics by Dutch asset managers. It finds that the effectiveness of engagement is difficult to demonstrate. Engagement can nevertheless be a valuable tool within a sustainable investment strategy. Engagement aimed at strengthening governance or providing information about a company's sustainability performance are useful steps forward. More specific reporting on engagement efforts can strengthen insight into the value case for engagement. A success factor is limiting engagement efforts to a select group of companies and ESG, as engagement across the entire portfolio is often not realistic. Other success factors include a credible threat of escalation and entering into partnerships with other shareholders.
ESMA publishes report on sustainability risks and disclosures in investment fund sector
On 30 June, the European Securities and Markets Authority (ESMA) published a report on its Common Supervisory Action (CSA) in 2023 and 2024 with national authorities on the integration of sustainability risks and disclosures in the investment fund sector. The CSA focused on compliance with (i) requirements on the integration of sustainability risks under the AIFMD and UCITS Directive; (ii) the Sustainable Finance Disclosure Regulation (SFDR), including disclosure of Taxonomy-aligned investments; and (iii) the ESMA Supervisory briefing on sustainably risks and disclosures for investment management. While the overall level of compliance was satisfactory, national supervisory authorities found several vulnerabilities. These were addressed through bilateral letters and other supervisory orders. Going forward, improvement is needed on the integration of sustainability risks, and SFDR disclosures on the entity and product level. ESMA encourages national authorities to continue proactive engagement with market participants and follow up where vulnerabilities were detected, including enforcement where appropriate.
EIOPA publishes report on biodiversity risk management in the insurance sector
On 30 June, the European Insurance and Occupational Pensions Authority (EIOPA) published a report exploring to what extent and how EU (re)insurers identify, measure and manage biodiversity risks. Over half of global GDP is estimated to depend on biodiversity services, with particular exposure of sectors such as agriculture, construction and healthcare. Assessing biodiversity risks is challenging, due to their complexity and interconnectedness with other environmental risk factors. About one in every five undertaking mentions biodiversity in their Own Risk and Solvency Assessment (ORSA), although current assessments remain largely qualitative. Undertakings recognise biodiversity loss as a significant emerging risk but face challenges in quantifying its financial impact. Insurers are therefore still in the early stages of identifying, measuring and managing biodiversity loss, and primarily consider it from a reputational point of view. Further engagement is necessary to strengthen the industry’s response to biodiversity-related risks.
ESAs launches consultation on guidelines for supervisory stress testing of ESG risks
On 27 June, the European Supervisory Authorities (EBA, EIOPA, and ESMA, together: the ESAs) published a joint consultation paper on draft guidelines for stress testing of ESG risks. The guidelines are addressed to competent authorities for the banking and insurance sectors, who should apply the guidelines when they conduct stress tests. They provide guidance on the design and characteristics of stress tests with ESG elements, as well as on the organisational and governance arrangements necessary for such stress tests. The consultation is open until 19 September 2025.
ESMA outlines supervisory approach to first-time ESRS sustainability reporting
On 20 June, ESMA issued a public statement on how it and national authorities will supervise sustainability reporting by the first wave of large public-interest entities under the ESRS. In its statement, ESMA acknowledges the challenges posed by the simultaneous rollout of ESRS, delays in national implementation of the CSRD, and ongoing legislative changes under the Omnibus proposals. To address these complexities, ESMA emphasizes that enforcement of its Guidelines for Enforcement of Sustainability Information will be proportionate and pragmatic during this early phase. The guidelines offer built-in flexibility, allowing national authorities to tailor their approach based on local legal frameworks and issuer circumstances.
Basel Committee releases voluntary climate risk disclosure framework for banks
On 13 June, the Basel Committee on Banking Supervision (BCBS) published a voluntary disclosure framework to guide banks in reporting climate-related financial risks. The framework provides templates for both qualitative and quantitative disclosures, covering key areas such as financed emissions, exposure to physical climate risks, energy efficiency in real estate portfolios, and sector-level emissions intensity. Key changes compared to the November 2023 draft include: (i) replacing references to ‘forecasts’ with ‘targets’ to better reflect the voluntary nature of the revised framework, (ii) updating terminology to align with the materiality principle under the Pillar 3 disclosure framework; and (iii) removing the reporting template for facilitated emissions related to capital markets activities. The Committee also emphasises the need for flexibility, acknowledging that climate data is still evolving and that a mix of metrics is needed to capture the full scope of banks’ climate-related exposures, encouraging a holistic interpretation of the disclosures.
SEC withdraws proposed ESG disclosure rules for US investment firms
On 12 June, the U.S. Securities and Exchange Commission (SEC) withdrew its proposed rule requiring enhanced ESG disclosures from certain investment advisers and investment companies. The proposal, originally issued as part of a broader ESG rulemaking agenda between 2022 and 2023, aimed to improve transparency around how firms define and apply environmental, social, and governance criteria in their investment strategies. The SEC has now confirmed it will not move forward with finalising the rule. Any future action in this area would require a new proposal. The decision reflects a shift in the SEC’s regulatory approach and leaves ESG disclosure expectations for investment firms in the U.S. less defined, for now.
ECB publishes climate-related financial disclosures on ECB portfolios
On 12 June, the ECB published its third set of climate-related financial disclosures, covering its Eurosystem assets held for monetary policy purposes and the ECB’s foreign reserves and its non-monetary policy portfolios. Emissions from ECB corporate bond holdings in the Eurosystem have fallen by 25% since 2021, supported by the ECB’s tilting framework, which aims to cut emissions intensity by 7% annually. The ECB also introduced a nature-related risk indicator, showing that 30% of its corporate bond portfolio is invested in sectors vulnerable to biodiversity loss, such as utilities, food, and real estate. The share of green bonds climbed to 28%, with a target of 32% by 2025. The ECB stresses that despite the progress, data quality and consistency remain challenging. ECB calls for stronger, harmonised reporting standards across the financial system to drive more informed and effective climate action.
Speech by ECB’s Claudia Burch: simplification without deregulation
On 11 June, the ECB published a speech by Claudia Burch, Chair of the ECB’s Supervisory Board, titled ‘Simplification without deregulation’. The speech highlights the ECB’s approach to streamlining banking supervision while maintaining strong regulatory standards, particularly in relation to sustainability. Climate and environmental risks are now central to supervisory assessments, not secondary concerns. While simplification efforts, such as refining the SREP process, aim to enhance clarity and efficiency, they will not dilute ESG expectations. The ECB’s supervisory priorities for 2025–2027 continue to place strong emphasis on environmental risk management, with remediation measures for banks falling short on ESG governance. Supervision should be aligned with the EU’s sustainable finance agenda, including the Taxonomy Regulation and the CSRD. Broader reforms like Basel III and CRR3 further integrate ESG across the banking sector.
AFM calls for clearer, enforceable product categories in SFDR review
On 30 May, the AFM submitted its response to the EC’s call for evidence on the review of the SFDR). The AFM reiterates its proposal to introduce two clear and enforceable product categories: ‘sustainable’ and ‘transition’, each based on objective minimum criteria to improve clarity, comparability, and oversight. The AFM warns against introducing a vague third category for ‘light’ ESG products, cautioning that it could mislead investors unless accompanied by clear labelling and minimum standards. The regulator also stresses the importance of SFDR disclosures applying equally to both retail and professional products. In a joint letter with Germany’s BaFin and Austria’s FMA, the AFM urges the EC to test any new categories with investors and market participants to ensure the framework remains credible and effective.ESMA publishes final report on ESG-related amendments to CRA Regulation
On 18 December, ESMA issued its final report on proposed amendments to the Delegated Regulation and Annex I of the Credit Rating Agencies (CRA) Regulation. The report follows a public consultation on this topic. The proposed amendments aim to enhance the incorporation of ESG factors into credit rating methodologies, and improve disclosures on the relevance of ESG factors for individual credit rating actions. Among other things, CRAs would need to prominently identify in press releases or reports when ESG considerations are a key element of a credit rating or rating outlook. The report will be submitted to the European Commission for further consideration.
EIOPA and ECB publish joint paper on solutions to reduce the impact of natural catastrophes
On 18 December, the European Insurance and Occupational Pensions Authority (EIOPA) and the European Central Bank (ECB) released a joint paper proposing an EU-level solution to address the widening gap in natural catastrophe insurance protection due to the increasing risk posed by climate change. Building on existing national and EU structures, the paper spells out an EU-level solution composed of two pillars. The first pillar is an EU public-private reinsurance scheme aimed at increasing insurance coverage for natural disaster risks. The second pillar is an EU fund for public disaster financing, designed to strengthen disaster risk management among member states. The proposed solutions are intended as a basis for discussion among stakeholders. They should be complementary to ambitious mitigation policies to tackle climate change and reduce the associated catastrophe risks.
EIOPA publishes annual working programme 2025
On 17 December, EIOPA released its Final Single Programming Document 2025-2027 including its Annual Work Programme 2025. On sustainability, EIOPA’s priorities for 2025 include addressing gaps in natural catastrophe protection, and supervising sustainability risks from prudential and conduct perspectives. Initiatives on conduct risks, such as greenwashing, will be guided by reviews and implementation of product-related sustainability rules. The operational objectives regarding sustainability are (i) integrating ESG risks into prudential and conduct frameworks and supporting ESG risk analyses; (ii) promoting sustainability reporting and fighting greenwashing; (iii) addressing protection gaps; and (iv) fostering the understanding of catastrophe models and ensuring data accessibility.
EC adopts MiCAR RTS on sustainability information
On 17 December, the EC adopted Regulatory Technical Standards (RTS) on sustainability information under the Market in Crypto Assets Regulation (MiCAR). MiCAR requires crypto-asset issuers and service providers to disclose their principal adverse impacts (PAI) on the environment, particularly those related to consensus mechanisms used to issue or validate crypto-assets that have significant energy consumption and environmental implications. The RTS specify the content, methodologies, and presentation of information regarding sustainability indicators in relation to PAI on climate and other environment‐related adverse impacts.
Previous updates
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June
EBA launches consultation on bank’s Pillar 3 disclosures on ESG
On 22 May, the European Banking Authority (EBA) launched a public consultation on proposed amendments to banks’ Pillar 3 ESG disclosure requirements under the Capital Requirements Regulation (CRR3) as specified in Implementing Regulation (EU) 2024/3172. In line with Omnibus, EBA proposes a proportionate approach with simplified requirements for smaller and non-listed banks, and no new obligations for large listed banks. It also clarifies existing reporting requirements. The proposed changes include the extension of ESG risk-related disclosures to all institutions and the disclosure of information on shadow banking and equity exposures. Transitional measures and supervisory flexibility aim to reduce compliance burdens. A public hearing on the consultation will take place via conference call on 26 June 2025. The consultation runs until 22 August 2025.
ECB’s Frank Elderson speech on nature and economy
On 22 May, ECB board member Frank Elderson held a speech called ‘Nature’s bell tolls for thee, economy!’ at an annual biodiversity dinner in Leiden. He noted that while economies are heavily reliant on ecosystem services, the economic value of nature services such as pollinators, mangroves and water supplies is not sufficiently considered. ECB is taking steps to account for nature-related risks, such as considering the potential effects of nature degradation on banks’ balance sheets. On Omnibus, Elderson states that excluding too many firms from the CSDDD may reduce the availability of vital data needed to assess climate and nature related financial risks. He also referred to preliminary findings published on 23 May of a study on nature risks for the EU’s economic output.
EIOPA publishes study on consumer friendly information regarding natural catastrophe coverage of home insurance policies
On 19 May, EIOPA published a study calling for more transparent and consumer-friendly disclosures in home insurance policies, especially regarding natural catastrophe (NatCat) coverage. The review of Insurance Product Information Documents (IPIDs) across eight European countries found good practices but also widespread use of vague, inconsistent language and unclear exclusions. As a result, consumers may mistakenly believe they are covered for risks like floods or fires when they are not, contributing to what EIOPA calls the “insurance illusion.” With climate-related disasters on the rise and only a quarter of NatCat losses insured in recent decades, closing this protection gap is increasingly urgent. EIOPA recommends clearer definitions, consistent terminology, and better presentation of optional add-ons to help consumers make informed decisions.
Revised Benchmark Regulation published in EU Official Journal
On 19 May, the revision of the Benchmark Regulation was published in the Official Journal of the EU. In short, the revision limits the regulation’s requirements for financial benchmarks, but not for inter alia EU climate transition benchmark and EU Paris-aligned benchmarks. The revision applies from 1 January 2026.
NGFS publishes short-term climate risk scenarios
On 7 May, the Network for Greening the Financial System (NGFS) published short-term climate scenarios (including main takeaways) for central banks and supervisors. This is the first dedicated framework for analysing the potential near-term impacts of climate policies and climate change on financial stability and economic resilience, which can be used for climate stress-testing exercises. It discusses four non mutually exclusive scenarios: (i) disasters and policy stagnation; (ii) highway to Paris; (iii) sudden wake-up call; and (iv) diverging realities. The main takeaways of the short-term scenarios are that (i) regional extreme weather events generate temporary but material GDP losses, with effect on the global economy, and could increase the cost of the transition; (ii) delaying transition efforts increase the economic costs of transitioning and could cause additional financial stress.
EC launches call for evidence on SFDR revision
From 2 May to 30 May, the European Commission held a call for evidence on the review of the Sustainable Finance Disclosure Regulation (SFDR). The review will address concerns that the SFDR classification system is viewed by the market as a labelling system rather than a transparency system. The review will aim to increase legal clarity and ensure coherence within the sustainable finance framework, including the current goal to reduce reporting obligations for companies. Published responses can be found here. The EC expects to publish the revised SFDR by Q4 2025.
AFM publishes first ESG update
On 1 May 2025, the AFM published its first ESG update, setting out its expectations for sustainable financial services in 2025 and 2026. While the AFM notes progress across the sector, it emphasises the need for continued efforts in four key areas: sustainability claims, the SFDR, product governance, and suitability assessments. The AFM expects sustainability claims to be accurate and not misleading, SFDR disclosures to be clear and reliable, sustainability requirements to be embedded in product governance policies, and a proper alignment between clients' sustainability preferences and the products offered. The AFM’s ‘Agenda 2025’ outlines the supervisory studies planned for this year. As part of its ongoing focus on sustainable finance, the AFM expects to publish a new ESG update in autumn 2025.
ISSB proposes targeted IFRS S2 amendments for financial institutions
On 28 April, the International Sustainability Standards Board (ISSB) published an exposure draft proposing amendments to IFRS S2 on climate-related disclosures. The aim is to simplify application for certain entities – particularly financial institutions – without compromising the relevance of the information for investors. Key proposals include allowing the exclusion of certain financed Scope 3 emissions (e.g. from derivatives or insurance), permitting alternative GHG measurement methods where required by local regulations, and introducing more flexibility in using industry codes (GICS) for disaggregating financed emissions. The consultation is open until 27 June 2025, with final amendments expected by year-end.
ECB publishes Q&A on ESG Pillar 3 reporting
On 11 April, the European Central Bank (ECB) published a single Q&A (No. 2024_7225) on a GHG reporting requirement for banks as part of their Pillar 3 reporting requirements under the Capital Requirements Regulation (CRR). It clarifies how the denominator should be calculated in Template 1, column k and i, of Commission Implementing Regulation (EU) 2021/637 which mandates GHG reporting of the gross carrying amount of exposures.
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May
FMSB publishes good practices for governance of sustainability-linked financial products
On 30 April, the Financial Markets Standards Board (FMSB) published its Statement of Good Practice on the governance of sustainability-linked products (SLPs), aiming to establish globally applicable standards in wholesale financial markets. It outlines six statements of good practice aiming to strengthen and standardise governance around SLPs, including on governance, KPIs, targets, labelling of products as ‘sustainability-linked’, and contract clauses. The good practices aim to complement industry guidelines from ICMA, LMA, ELFA and ISDA on sustainability-linked bonds, loans and derivatives. The good practices are supported by a risk register identifying major risks associated with the issuance of SLPs for service providers and users.
Dutch Ministry of Finance launches consultation on CRD VI implementation act
On 30 April, the Dutch Ministry of Finance launched a consultation on the Dutch Implementation Act of the Capital Requirements Directive (CRD) VI including the explanatory memorandum. In relation to ESG risks, the implementation act proposes that banks will need to adopt a capital adequacy plan to monitor and address the financial risks arising from ESG factors over the short, medium and long term. It should address ESG-related developments in all relevant jurisdictions in which the bank is active, including global and local developments to achieve climate neutrality. The Implementation Act is intended to apply as of 11 January 2026.The consultation is open until 28 May 2025.
EBA publishes key indicators on climate risk in the EU/EEA banking sector
On 25 April, the European Banking Authority (EBA) released a new ESG dashboard offering centralised access to key climate risk indicators for EU/EEA banks. Based on banks’ Pillar 3 disclosures, the dashboard tracks both transition and physical risks. It shows that over 70% of banks' exposures are linked to high-emitting sectors, indicating significant transition risks. Although data on physical risks suggest lower exposures, inconsistencies in reporting underline the need for cautious interpretation. Figures on real estate lending point to relatively moderate transition risk, although many banks still rely on estimates for energy efficiency data. The dashboard also tracks banks' alignment with the EU Taxonomy, where the average Green Asset Ratio (GAR) remains low, reflecting the early stage of the green transition.
NZBA and UNEP FI publish updated Guidance for climate target setting for banks
On 22 April, the Net Zero Banking Alliance (NZBA) and the United Nations Environment Programme Financial Institutions (UNEP FI) published the third version of their Guidance for Climate Target Setting for Banks. The update reflects a reduced level of ambition compared to the previous version. Whereas the second version framed its provisions as voluntary obligations, the third version presents them as recommendations. For example, instead of requiring that targets ‘shall at a minimum align with a goal to limit global warming to 1.5°C’ the updated Guidance now recommends targets to ‘align with the goals of the Paris Agreement, aiming to limit global warming to well below 2°C, striving for 1.5°C’. Targets are recommended to cover clients’ scope 1, 2 and 3 emissions, with 2030 and 2050 targets and a five-year intermediate target in between.
EBA updates risk indicators and methodological guide
On 16 April, the EBA published an updated list of risk assessment indicators along with a methodological guide. The update, based on reporting framework version 4.0, aims to support consistent interpretation of key bank figures—without introducing new reporting burdens. It includes indicators on profitability, solvency, and operational risk, as well as new indicators introduced under the Banking Package (CRR3/CRD6) and ESG-related metrics.
IAIS publishes paper on climate risks supervision for insurance sector
On 16 April, the International Association of Insurance Supervisors (IAIS) published an Application Paper on the supervision of climate-related risks in the insurance sector. It aims to enable insurance sector supervisors to integrate climate related risks into their supervisory practices. The paper explores the application of the IAIS’ existing Insurance Core Principles (ICPs) to climate related risks. It also equips supervisors with best practices and guidance on: (i) the role of supervisors in assessing climate-related risks; (ii) the integration of climate-related risks into supervisory frameworks for corporate governance, risk management and internal controls; (iii) the impact of climate-related risks on valuation and investment practices; (iv) supervisory reporting, public disclosure and macroprudential supervision of climate-related risks; (v) group supervisory issues; and (vi) the role of climate-related risk scenario analysis and considerations for the impact of climate-related risks on market conduct.
ESMA publishes analysis of ESG-related terms in fund names
On 10 April 2025, ESMA published an analysis on the increased use of environmental, social and governance (ESG) terms in EU fund names from 2009 to mid-2024, and the impact on investment flows. The analysis covers both UCITS and alternative investments funds (AIFs). It finds that the use of ESG terminology has a material impact on investment decisions by retail and institutional investors. Adding an ESG term can significantly boost fund inflows. However, the impact varies depending on the specific ESG terms used, with environmental-related terms leading to the most substantial inflows. The analysis also shows that the proportion of funds with ESG-related names has increased from less than 3% before 2015 to around 9% by mid-2024, with a notable curtail in 2021 that is probably due to legislative changes (such as SFDR) and rising greenwashing concerns. ESMA will continue to monitor fund market trends and the impact of its Guidelines on funds' names using ESG or sustainability-related terms.
ESMA publishes final report on ESG disclosures under EU Benchmarks Regulation
On 9 April, the European Securities and Markets Authority (ESMA) published its final report on a common supervisory action conducted together with national financial supervisors on ESG disclosures under the EU Benchmarks Regulation. For several ESG factors, the lack of specific guidance on the definition and calculation of ESG factors led to divergent and inconsistent calculations and disclosures across administrators and benchmarks. The report also flags inconsistencies in the assumptions that administrators use for determining ESG factors. Considering the findings, the report provides clarifications of transparency expectations as well as guidance on the calculation of the ESG factors, including good practices. It features recommendations to the EC, including on streamlining ESG disclosure requirements to reduce burdens for administrators while safeguarding the meaningfulness of disclosed ESG information. The AFM also published a press release on this report, in which it announces that it has taken enforcement action against one benchmark operator based on its research under the ESMA report.
ESMA launches consultation on rules for external reviewers of European Green Bonds
On 7 April 2025, ESMA launched a public consultation based on a consultation paper on regulatory technical standards (RTS) and implementing technical standards (ITS) for the external reviewers regime under the EU Green Bond Regulation. It covers five draft RTS and one ITS on: (i) the appropriateness, adequacy and effectiveness of systems, resources and procedures; (ii) the compliance function, and resources, expertise and access to information; (iii) the soundness of administrative and accounting procedures and internal control mechanisms and the effectiveness of control and safeguard arrangements for information processing systems; (iv) the quality of information used when providing reviews; (v) information, form and content of applications for recognition; and (vi) standard forms, templates and procedures to notify ESMA of material changes. The consultation will be open until 30 May 2025. ESMA expects to publish a final report in Q4 and submit the draft standards to the EC by 21 December 2025.
MiCAR RTS on sustainability information published in Official Journal
On 31 March, the Regulatory Technical Standards (RTS) on sustainability information under the Market in Crypto Assets Regulation (MiCAR) were published in the Official Journal of the EU. MiCAR requires crypto-asset issuers and service providers to disclose their principal adverse impacts (PAI) on the environment, particularly those related to consensus mechanisms used to issue or validate crypto-assets that have significant energy consumption and environmental implications. The RTS specify the content, methodologies, and presentation of information regarding sustainability indicators in relation to PAI on climate and other environment-related adverse impacts. The Annex of the RTS provides mandatory templates for this. -
April
LMA, APLMA and LSTA publish green, social and sustainability-linked loan principles
On 26 March, LMA, APLMA and LSTA published updated versions of its green Sustainability Linked Loan Principles (SLLP) including guidance, Green Loan Principles (GLP) including guidance, and Social Loan Principles (SLP) including guidance. The updated principles and guidance aim to promote the development of the relating loan products, and underpin their integrity. The full sustainable lending library is available here.
ECB publishes working paper on the effect of climate change risks on sovereign credit ratings
On 25 March, the ECB published a working paper examining whether sovereign credit ratings account for physical and transition climate risks. The study uses a panel dataset covering a large number of countries over two decades. The paper shows that physical climate risks – such as temperature anomalies and natural disasters – are linked to lower sovereign credit ratings, especially after the Paris Agreement. While transition risks were not consistently reflected over the entire period, since 2015, countries with strong CO₂ reduction targets and declining emissions have seen higher ratings. In contrast, nations with high debt or fossil fuel dependence are rated lower. Conversely, sovereigns positioned to benefit from the green transition – particularly those rich in transition-critical materials – are seeing improved ratings. It highlights a shift in how climate risks and opportunities are being evaluated in sovereign credit assessments.
ESMA publishes compliance table on Guidelines for ESG and Sustainability-Related Fund Names
On 19 March 2025, the European Securities and Markets Authority (ESMA) released a compliance table detailing how EU Member States are aligning with its Guidelines on fund names using ESG or sustainability-related terms. The table shows that most EU countries have already complied with the Guidelines. The Czech Republic is the only country listed as not complying, citing the lack of a sufficient legal basis in national legislation to enforce the specific thresholds set by ESMA. Bulgaria, Hungary, Latvia, and Lithuania are noted as intending to comply.
Dutch implementation acts of EU Green Bond Regulation published in government gazette
On 17 March, the Dutch Implementing Decree and Entry into Force Decree for the European Green Bond Regulation (Regulation (EU) 2023/2631) were published in the Government Gazette. The Implementing Decree implements the Regulation by amending the Decree on EU Regulations under the Dutch Financial Services Act. The Entry into Force Decree specifies that the Dutch European Green Bond Regulation Implementing Act will come into effect on 17 March 2025.
ECB publishes working paper on the reflection of physical climate risks in residential mortgage rates
On 12 March, the ECB published a working paper highlighting that banks are increasingly factoring physical climate risk into mortgage rates, particularly in high-risk areas. However, only banks deemed to be adequately managing climate risk tend to charge higher risk premiums. This exposes gaps in climate risk pricing and reinforces the ECB’s call for stronger supervisory action. The paper recommends that all banks integrate climate risks into their credit assessments and urges supervisors to step up their oversight efforts.
AFM publishes statement on Omnibus proposal
On 11 March, the Dutch Authority for the Financial Markets (AFM) published a statement (also in Dutch) on the European Commission’s Omnibus proposal. The proposal is a political choice and is not yet finalised. The number of Dutch listed companies in scope would reduce from about 160 to 100 in wave 1. AFM is concerned that this could result in less information availability. The removal of ‘reasonable assurance’ would also limit the reliability of information for stakeholders. AFM urges listed companies and accounting organisations to continue their efforts for reliable and transparent sustainability information. Such information helps investors assess sustainability risks and opportunities and encourages sustainable corporate behaviour. AFM maintains its phased approach. In 2025, AFM will review sustainability reports published by large, listed companies. These reviews will not lead to enforcement, except in case of flagrant violations. AFM prefers a cooperative approach, and its publications aim to contribute to a collective learning curve.
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March
EBA publishes report on data availability and common methodology for ESG exposures
On 24 February, The EBA published a report on ESG data availability and accessibility, and the feasibility of a standardised methodology for identifying credit exposures to ESG risks. The report shows progress in data availability, but signals that the ESG data landscape remains incomplete. It expects significant improvements from initiatives like CSRD and ESRS. While methodologies for assessing transition risk and mortgage exposures are developed, other ESG risks are still in early stages and mostly qualitative. Few institutions measure credit risk linked to ESG factors, focusing primarily on climate risk. The EBA concludes that a standardised methodology is feasible but should follow a sequenced approach due to the insufficient evidence of ESG risks' impact on credit risk.
ECB publishes working paper on green and brown returns
On 18 February, the ECB published a working paper asking: ‘Does investing in green companies pay off?’. The paper concludes that in regions with a functioning carbon market, such as the EU, green investments can be financially rewarding. The study shows that green firms have outperformed their brown counterparts in recent years. It suggests that the existence of a well-regulated carbon market helps explain the observed green equity premium. The research also indicates that a well-regulated carbon market explains the green equity premium and that investor preference for green financial assets is unlikely to change this outcome.
Frank Elderson highlights climate risks for financial stability
On 12 February 2025, the ECB published Frank Elderson’s speech, ‘From concept to delivery: accounting for climate and nature in maintaining price stability and keeping banks safe and sound’. Elderson emphasised that while central banks and regulators are not climate policymakers, they must account for climate risks to fulfil their mandate and maintain financial stability. Key initiatives include integrating climate factors into macroeconomic analyses, prioritising climate-conscious companies in bond purchases, and exploring the inclusion of climate risks in collateral requirements for loans. Since 2020, banks have been required to incorporate climate risks into their governance, strategy, and risk management, backed by clear deadlines and potential sanctions. Elderson stressed that climate and natural risks will continue to rise, making reliable data and reporting essential under the EU’s sustainable finance framework.
ECB publishes article on banks’ funding of the green transition
On 12 February 2025, the ECB published an article titled ‘Green investment needs in the EU and their funding’. The article highlights the significant role of European banks in financing the eurozone’s green transition. Banks, providing nearly 60% of debt financing for non-financial companies and over 80% of household debt, play a key role in shaping the transition of carbon-intensive sectors. Despite a decline in CO2 emissions from companies financed by eurozone banks between 2018 and 2021, banks remain exposed to high-emission industries, particularly in the industrial, energy, and transport sectors. The article stresses the need for further integration of European capital markets to expand private funding beyond traditional bank lending, ensuring a more resilient green transition.
DNB publishes consultation on climate and environmental risks Guide
On 11 February, the Dutch Central Bank (DNB) published a consultation on its updated Guide on climate-related and environmental risks. DNB applies this guide in its supervision of insurers, pension funds, investment firms and institutions and electronic money and payment institutions, but not to banks (covered by the ECB Guide). The Guide provides an updated overview of legislation on climate and environmental risks, explains these risks, and provides points of attention for managing these risks. Additionally, it provides a detailed sectoral overview of legal frameworks and good practices for risk management. The consultation is open until 26 March 2025.
PSF publishes report on simplifying the EU Taxonomy
On 5 February, the EU Platform on Sustainable Finance (PSF) published a report ‘Simplifying the EU Taxonomy to foster sustainable finance’. It proposes five measures: (i) on DNSH (do no significant harm): a distinction between users (non‑financial and financial entities), uses (turnover and capital expenditure), and geographies (EU and non‑EU exposures); (ii) applying a materiality principle with clear thresholds and simplified calculations, and a limited mandatory scope; (iii) clear guidelines for using estimates and safe harbours for financial sector reporting; (iv) allowing proxies and estimates for GAR (green asset ratio) and GIR (green investment ratio) with simplified retail assessment and reduced denominator; (v) voluntary and simplified disclosure regimes for SMEs, banks, and investors.
ESMA publishes 2026-2028 Programming Document
On 31 January, the ESMA released its 2026-2028 Programming Document outlining its strategic focus. On sustainability, preventing greenwashing remains a top priority. ESMA aims to boost investor confidence in ESG investments by promoting high-quality sustainability disclosures and will actively monitor the implementation of guidelines like the ESG Fund Names and Sustainability Information Enforcement Guidelines. In Q2 2026, ESMA will release a report on greenwashing risks and finalise a project under the European Commission’s Technical Support Instrument.
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February
EIPOA recommends new risk factors for flood, windstorm and hail
On 30 January, EIOPA released its updated recommendations on the incorporation of natural catastrophe risks into insurers' standard formula calibrations. The recommendations are based on a comprehensive reassessment conducted in 2023 and 2024, considering new scientific research, recent climate data, and advanced risk modelling. EIOPA suggests adjusting risk factors for events like floods, hail, earthquakes, and windstorms in specific regions, as well as expanding the scope to include more countries. These proposals have been submitted to the EC, for potential recalibration of the relevant standard formula parameters.
UNEP FI publishes practical guide for 1.5°C scenarios for financial sector
On 23 January, the United Nations Environment Programme Finance Initiative (UNEP FI) published a practical guide to 1.5°C scenarios for the financial sector. This extensive guide aims to help the sector effectively interpret and apply climate scenarios. It addresses the role of IPCC-assessed 1.5°C scenarios for financial actors, their relation to NGFS and IEA climate scenarios, required emissions reductions for 1.5°C pathways, carbon capture and storage, energy demand across various sectors (including energy, transport, agriculture, industrials, and real estate), actions needed for financing the transition to net zero (including sector-specific analyses), and socioeconomic considerations.
PSF publishes report on assessment of corporate transition plans
On 23 January, the Platform of Sustainable Finance published a report on the assessment of corporate climate transition plans. The report provides financial market participants with guidance on assessing transition plans, based on four core elements aligned with EU requirements:
The report emphasises that companies can integrate other ESG objectives like climate adaptation, biodiversity, and just transition principles in their plans.
AFM publishes supervisory agenda for 2025
On 16 January, the Dutch Authority for the Financial Markets (AFM) released its agenda for 2025. Regarding sustainability, the AFM aims to support (financial) companies and consumers to consider sustainability risks and impacts in their decisions. The AFM’s supervision of sustainability in financial services focuses on two main goals:
- Ensuring that retail investors can invest in sustainable products based on high-quality information and trust that these products perform as advertised.
- Ensuring that consumers and households are aware of climate risks and understand their options when facing such risks.
Key activities outlined in the agenda include investigating compliance with the Sustainable Finance Disclosure Regulation (SFDR) and investigating sustainability claims made by financial institutions.
EBA consults Guidelines on ESG scenario analysis
On 16 January, the European Banking Authority (EBA) launched a public consultation based on a consultation paper on its draft Guidelines for ESG scenario analysis. The EBA highlights the need for forward-looking methods to assess the financial and business model risks associated with ESG issues. The guidelines focus on using scenario analysis to improve institutions' resilience to environmental risks, particularly climate change.
They outline two primary applications of scenario analysis: assessing short to medium-term financial resilience, and evaluating long-term business model resilience. The guidelines are structured into three sections: Integrating scenario analysis, setting scenario criteria, and conducting climate stress tests aligned with the institution’s strategy and business model adaptation. The consultation is open until 16 April 2025.
FSB introduces an analytical framework to assess climate-related vulnerabilities
On 16 January, the Financial Stability Board (FSB) published the report ‘Assessment of Climate-related Vulnerabilities: Analytical framework and toolkit’. This report explains how climate-related shocks from policy changes, technological innovations, changing consumer preferences (transition risks), or physical hazards like floods and droughts (physical risks) pose challenges to financial institutions and threaten financial stability. The FSB presents a framework to identify and amplify these risks within the global financial system, building on the existing financial stability surveillance framework. The report also specifies metrics to monitor climate-related vulnerabilities from a forward-looking perspective.
Net Zero Asset Managers initiative suspends its activities
On 13 January, the voluntary Net Zero Asset Managers (NZAM) initiative announced it will suspend its activities referring to political developments in the U.S. and differing regulatory and client expectations across investor jurisdictions. The announcement follows the departure of several major signatories on 10 January 2025. NZAM is now reviewing its initiative and will consult with signatories throughout the review process.
EBA publishes Guidelines on prudential ESG risk management
On 9 January, the European Banking Authority (EBA) published its final Guidelines on the management of ESG risks. These guidelines specify the CRD requirements on internal ESG risk management processes. They specify the content of plans that institutions should develop to monitor and address financial risks arising from ESG factors, including those arising from the transition towards the EU’s climate neutrality target for 2050. EBA expects institutions to adopt a holistic ESG planning process on ESG legislation covering all regulatory requirements, such as CSRD, CSDDD and sector-specific legislation. The guidelines will be supplemented by the Guidelines on ESG scenario analyses (see our spotlight above) and will apply from 11 January 2026. For small and non-complex institutions, they will apply from 11 January 2027.
ECB publishes working paper on climate-linked bonds
On 9 January, the European Central Bank (ECB) released a working paper on climate-linked bonds. These bonds tie bond payouts to measurable climate factors like temperature or greenhouse gas levels. This encourages issuers to align their actions with climate goals and provide investors with a hedge against long-term climate risks. Governments can use these bonds to integrate climate accountability into fiscal policies, while reducing the cost of servicing bonds if climate outcomes improve. Investors benefit from long-term protection against climate risks, and these bonds help enhance financial system resilience by addressing the insurance gap for climate-related damages. The paper introduces an asset pricing model for these bonds, highlights a growing demand amid climate risks, and explores the challenges such as clear climate metrics, ensuring market liquidity, and international coordination.
ESMA publishes 2024 ESEF XBRL files and ESEF conformance suite
On 8 January, the European Securities and Markets Authority (ESMA) released the 2024 European Single Electronic Format (ESEF) XBRL taxonomy files and updated the ESEF Conformance Suite. This aims to helps software vendors and issuers prepare 2024 IFRS consolidated financial statements using the latest ESEF format. It also helps EU issuers listed on US capital markets comply with SEC reporting obligations. The 2024 ESEF taxonomy files and Conformance Suite apply to annual financial reports for financial years starting on or after 1 January 2024, once the 2024 ESEF Regulation update is in force. Alternatively, issuers may use the 2022 ESEF taxonomy files and conformance suite for annual financial reports relating to financial years beginning on or after 1 January 2024.
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January
ESMA publishes Q&A on guidelines on funds’ names
On 13 December, ESMA released Q&As on the application of its Guidelines for fund names (UCITS and AIFs) using ESG or sustainability-related terms. The Q&As address the application of investment exclusion criteria to green bonds, the definition of ‘meaningfully investing in sustainable investments’, and the definition of controversial weapons and its connection to the SFDR PAI statement.
Official publication of ESG Ratings Regulation
On 12 December, the ESG Ratings Regulation was published in the Official Journal of the EU. It applies from 2 July 2026. For more details on the new regulatory framework for ESG rating providers, see our Highlight in the June edition of ESG Matters.EIOPA publishes consultation on RTS on sustainability risk management and plans
On 4 December, EIOPA released a consultation and a consultation paper on Regulatory Technical Standards (RTS) on the management of sustainability risks, including sustainability risk plans. To limit the burden on companies and promote coherence and proportionality, the proposal: (i) builds on existing prudential requirements and integrates sustainability risk plans into companies’ existing risk management practices; (ii) ensures read-across between companies’ sustainability and transition plans; and (iii) enables companies, including those subject to the Corporate Sustainability Reporting Directive (CSRD), to disclose sustainability risks in a consistent and efficient manner. The consultation is open until 26 February 2025.ECB publishes staff contribution on EU securitisation framework
On 3 December, the European Central Bank (ECB) published a staff contribution to the EC’s targeted consultation on the functioning of the EU securitisation framework. It highlights the need for access to climate-related data for adequately assessing the increase in transition and physical risks associated with climate change. Indicators related to climate change risk offer investors valuable information to evaluate their impact and exposure to these risks. The ECB suggests introducing a minimum set of data metrics aligned with other EU regulatory criteria, such as the EU Taxonomy or Sustainable Finance Disclosure Regulation (SFDR) requirements. This alignment would enable a more effective assessment of associated climate-related risks without overburdening stakeholders.GFANZ publishes 2024 progress report
On 30 November, the Glasgow Financial Alliance for Net Zero (GFANZ) released its 2024 progress report, evaluating the financial sector’s progress towards net zero. The report looks back on GFANZ achievements in 2024 and outlines five strategic objectives under the 2024-2025 priorities. These objectives are: (i) promoting a common approach to transition plans; (ii) developing innovative transition finance solutions; (iii) unlocking high-integrity voluntary carbon markets; (iv) driving climate finance in emerging markets; and (v) enhancing transparency on net-zero transitions.EBA publishes study on bank’s Paris alignment
On 27 November, the European Banking Authority (EBA) released a pilot study on banks’ alignment with the temperature target of the Paris Agreement (PA). The study notes that prudential supervisory authorities have mainly focused on evaluating banks' resilience to climate-related financial shocks from a risk-oriented perspective. It advocates for a focus on banks' contributions to global warming through their financing of climate-damaging activities. The study quantifies the implied temperature rise associated with banks’ (non-SME) corporate loan books, finding an implied average temperature rise range between 3.7 and 4.1°C, depending on the aggregation methodology used. None of the reviewed institutions were found to be aligned with the PA target. -
ESG developments in Financial Institutions & regulation - 2024
See our overview of ESG developments in Financial Institutions & regulation in 2024
