EBA Pillar 3 Disclosure Framework on ESG Risks

What is the Pillar 3 disclosure on ESG risks?

Pillar 3 ESG risk disclosures reporting is required under the EU's CRR 3 prudential framework since June 2022, with a first reference date on 31 December 2022. They mandate that financial institutions publicly report on their exposure to Environmental, Social, and Governance (ESG) risks and detail the strategies used to manage them.

The framework has been significantly updated by a new Implementing Technical Standard (ITS) based on DPM 4.4 (Phase 1) that will apply with a reference date of 31 December 2026. Developed in line with the EU’s simplification agenda, the ITS aims to improve transparency and reporting of ESG risks in the banking sector by extending the scope of disclosures to all institutions in a proportionate manner and streamlining requirements to avoid duplication with other EU regulations.

Who are the impacted institutions? 

The revised ITS extends the disclosure requirements for ESG risks from large, listed institutions to all credit institutions in the EU, following a principle of proportionality. The scope and level of detail are calibrated according to the institution’s size and complexity, distinguishing between large institutions, other institutions, and Small and Non-Complex Institutions (SNCIs).

Disclosure templates: qualitative and quantitative information

The revised ITS significantly streamlines the Pillar 3 ESG disclosure framework by removing duplicative or less decision-useful information and simplifying the remaining requirements.

Key changes include:

• Removal of GAR- and BTAR-related templates: Templates 6-9, covering the Green Asset Ratio (GAR) and the Banking Book Taxonomy Alignment Ratio (BTAR) have been removed from the Pillar 3 ESG disclosure framework.
• Removal of carbon-intensive exposures template: Template 4, for disclosing exposures to the top 20 carbon-intensive firms, has also been deleted.
• Revised mitigation actions template: The scope of Template 10 has been revised to require the disclosure of all actions and exposures that mitigate climate-related risks, regardless of their alignment with the EU Taxonomy.

The qualitative part remains focused on business strategy and processes, governance, and risk management, requiring banks to disclose how they identify, monitor, and manage their exposure to ESG risks.

A proportionate, tiered approach to disclosure

The new ITS introduces a proportionate, tiered framework to tailor the disclosure burden to an institution's size, complexity, and listing status. Three levels of disclosures apply:

• Full set of disclosures: Applicable to large listed and non-listed institutions, other than large subsidiaries subject to the simplified framework.
• Simplified set of disclosures: Applicable to 'Other listed institutions' and large subsidiaries.
• Essential information set: A significantly reduced set of disclosures for SNCIs and other non-listed institutions.

The revised requirements are expected to apply from the reference date of 31 December 2026. To provide additional implementation time, SNCIs will have a later first reference date of 31 December 2027.