The EBA recently initiated a consultation on proposed guidelines aimed at managing ESG risks in the banking sector. According to ESG Today these guidelines are a fundamental step towards solving the risks associated with the European Union's transition to a climate-neutral economy. The proposed framework obliges banks to carry out regular assessments of the severity of ESG risks and to integrate these considerations into their normal risk management frameworks. This integration covers different risk categories such as credit, market, operational and liquidity risks, among others, over different time horizons. In addition, the guidelines mandate that institutions develop transition plans under the Capital Requirements Directive (CRD). These plans should address risks arising from climate change and financial risks arising from ESG factors and regulatory targets. The EBA's approach differs from other sustainability-focused regulations such as the Corporate Sustainability Reporting Directive (CSRD) and the proposed Corporate Sustainability Due Diligence Directive (CSDDD). The new guidelines favor mainstreaming ESG risks into strategies and policies over alignment with specific sustainability goals or transition pathways. (Copyright © 2024 FinTech Global)