The European Banking Authority has voiced support for a declaration issued by the Network for Greening the Financial System regarding the macro-financial dimensions of the energy transition. Published during the COP31 climate conference in Antalya, Türkiye, the declaration underscores how energy price fluctuations and physical climate impacts represent an operational reality for the financial sector.
Embedding Sustainability into European Banking Frameworks
As a member of the Network for Greening the Financial System, the European Banking Authority integrates sustainability factors into European Union banking regulation to promote financial stability and orderly market functioning.
To guide financial institutions, the authority has established guidelines detailing how banks should identify, measure, manage, and monitor environmental, social, and governance risks. These measures include expectations for scenario analysis, transition planning, climate disclosures, and tracking via an ESG risk dashboard.
Introducing Climate Risk Testing in 2027
The regulatory body announced on 9 November 2026 that the 2027 European Union-wide stress test will incorporate a dedicated module to evaluate physical and transition climate risks. This dedicated assessment will run alongside existing frameworks without altering the core stress test results.
François-Louis Michaud, Chair of the European Banking Authority, noted that climate and energy shocks are actively shaping current banking risks, emphasizing that effective risk management enables institutions to continue financing the European economy during its transition.
Overview of the Network for Greening the Financial System
Launched at the Paris One Planet Summit in December 2017, the Network for Greening the Financial System serves as a cooperative forum for central banks and financial supervisors to exchange practices and advance environment and climate risk management across mainstream finance.
By the end of 2025, membership in the network had expanded to 170 central banks, supervisors, and observers operating across five continents.
