Exposure to carbon-related assets and assets subject to climate change-related risks, including transition and physical risks
EBA Pillar 3 - Intro text
MSCI can help banks measure and report on climate-related risks in line with the European Banking Authority’s (EBA) ESG Pillar 3 framework on prudential disclosures.1
Our data and solutions support granular reporting required by the EBA ESG Pillar 3 disclosure mandates and can help banks carry out recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and activities addressed by the EU Taxonomy on Sustainable Activities (EU Taxonomy).
Requirements for EBA ESG Pillar 3 Disclosures
The EBA ESG Pillar 3 disclosure standards require banks with securities traded on a regulated market of any EU member state to report information about climate risks in four main categories starting in 2023:
EBA Pillar 3 - main categories
Support for counterparties through the low-carbon transition and in climate adaptation
Key performance indicators on sustainable finance activity based on the EU Taxonomy
How banks integrate ESG considerations into governance, business, strategy and risk management
EBA Pillar 3 - 10 reporting templates
10 reporting templates, 1 source for institutional-strength ESG and climate data
The EBA ESG Pillar 3 Framework features a set of 10 templates that request banks to disclose climate-related risks and actions to mitigate them, together with exposure to green assets and information on how they are making sustainability part of their risk management2.
The first set of mandatory disclosures cover five of the templates (Templates 1, 2, 4, 5 and 10), which the EBA has directed banks to disclose annually (PDF, 1.26 MB) starting in 2023 on the same date they publish their financial statements for 2022 or as soon as possible thereafter, based upon data as of the end of December 2022. Disclosures should be semi-annual thereinafter.
EBA Pillar 3 - Table
|MSCI ESG and climate data and metrics can support EBA ESG Pillar 3 framework reporting
Templates in green denote reporting that starts in 2023
|Template 1, Banking book: Climate change transition risk/Credit quality of exposures by sector, emissions and residual maturity||Template 2, Banking book: Climate change transition risk/Loans collateralized by immovable property, energy efficiency of the collateral||Template 3, Banking book: Climate change transition risk/Alignment metrics||Template 4, Banking book: Climate change transition risk/Exposure to top-20 carbon-intensive firms||Template 5, Banking book: Climate change physical risk/Exposures subject to physical risk||Template 6, Summary of green asset ratio KPIs||Template 7, Mitigating actions/Asset for the calculation of green asset ratio||Template 8, Green asset ratio (%)||Template 9, Mitigation actions, (banking taxonomy alignment ratio)||Template 10, Other climate change mitigating actions not covered by the EU Taxonomy|
|Climate Change Metrics and MSCI Climate Value-at-Risk||✓||✓||✓||✓|
|MSCI Total Portfolio Footprinting||✓|
|EU Sustainable Finance Metrics||✓||✓||✓||✓||✓||✓|
|MSCI Sustainable Impact Metrics||✓|
EBA Pillar 3 - msci climate and data metrics
MSCI climate data and metrics are designed to help banks and other financial institutions report consistently and in alignment with global, region- and country-specific voluntary or compliance frameworks, including:
- The EBA ESG Pillar 3 Framework
- The TCFD
- The Partnership for Carbon Accounting Financials (PCAF)
- The EU’s Non-Financial Reporting Directive (NFRD) and Corporate Sustainability Reporting Directive (CSRD), which takes effect in 2023 and will replace the NFRD
- The EU’s Sustainable Finance Disclosure Regulation (SFDR)
- Market in Financial Instruments Directive (MiFID) II Sustainability Preferences
- Solvency II
EBA Pillar 3 - key considerations
Start preparing now. Banks are expected to familiarize themselves with the EBA ESG Pillar 3 reporting obligations.
Prioritize near-term reporting deadlines, starting with the templates due in 2023.
Think best-efforts. The EBA encourages banks to obtain information on a best-effort basis in the context of relationships with counterparties.
Get ready for Scope 3 emissions disclosures, which will be phased in before becoming mandatory in June 2024.
Begin to consider other ESG factors. While the EBA ESG Pillar 3 requirements currently focus on climate change risk, disclosure may expand to quantitative disclosure of other ESG factors.
EBA Pillar 3 - related content cards
EBA Pillar 3 - Footnotes
1 This information is not intended to constitute legal advice.
2 Template 9 (BTAR) is not mandatory