European supervisory authorities issue guidelines for the integration of ESG risks into stress tests

The European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority issued their joint guidelines for the integration of environmental, social, and governance risks in stress testing on 08/01/2026.

They aim to ensure that competent authorities consistently integrate ESG risks into their national supervisory stress testing activities. Their recommendations concern the principles and methodologies for the stress tests, as well as the allowance of sufficient material resources, skilled and sufficient staff, and appropriate timelines to conduct the tests.

The guidelines will be published on the websites of the three European supervisory authorities (ESA), and the competent authorities are expected to notify whether they comply or intend to comply with the guidelines, or the reasons for non-compliance, two months after issuance. These joint guidelines apply from 01/01/2027.

"ESG risks are by now widely recognized as an important source of risk for the financial sector and can adversely affect the safety and…