Guide · Supervisor
Guidelines on environmental scenario analysis: final report
The EBA specifies how institutions should use climate and environmental scenarios, both in short-term stress tests and to test their business model.
- Organization
- European Banking Authority (EBA)
- Document date
- 5 November 2025
- Type
- Guide
- Language
- English
- Scope
- European Union
- Length
- 77 pages
What it contains
The final report on the EBA’s guidelines on environmental scenario analysis (EBA/GL/2025/04), dated 5 November 2025, complements the guidelines on the management of ESG risks of 9 January 2025. It defines scenario analysis as the process of identifying and assessing how a range of plausible future states of the world could affect an institution’s strategy and exposures, from simple qualitative approaches to sophisticated methods. They focus on environmental risks, starting with climate-related ones; social and governance factors are left out because their approaches are not yet sufficiently mature, and they may be considered in future updates.
The guidelines distinguish two uses: testing financial resilience to severe shocks in the short term and verifying capital and liquidity adequacy, and challenging the resilience of the business model, including in the medium to long term. They give guidance on the uses of scenario analysis, with a progressive and proportionate approach; on the prerequisites, with emphasis on identifying the transmission channels that turn climate risks into financial impacts and on the criteria for setting scenarios; and on a simplified approach in the form of sensitivity analysis. They also detail the particularities of an environmental stress test, as a complement to the guidelines on institutions’ stress testing, and how scenario analysis can sharpen strategy.
For institutions using the internal ratings-based (IRB) approach, they specify how physical and transition risks from climate change enter the scenarios of internal credit risk stress tests, on the basis of Article 177(2a) of Regulation (EU) No 575/2013. They apply from 1 January 2027 and institutions are expected to develop their capabilities gradually. The deadline for authorities to report whether they comply expires two months after the translations are published.
Why it matters for risk management
It offers practical guidance for designing climate scenarios, linking them with credit risk and with internal stress tests and justifying the level of sophistication proportionately. It is addressed to European supervisors and institutions; for the Dominican Republic it serves as a comparative reference, adapting scenarios and data to local exposure and sources.
Summary prepared by the Dominican Republic Risk Management Club from a reading of the original document, with the source verified on 12 October 2026. It does not replace reading the official text and is not advice.
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