JANUARY 2022
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ENVIRONMENTAL SOCIAL AND 
GOVERNANCE PILLAR 3 DISCLOSURES
Environmental Social and Governance (ESG) factors 
help measure the sustainability and societal impact 
of business activities that are financed by banks. The 
EBA has a role to play in identifying key metrics and 
methodologies for: risk management and supervi­
sory assessment; disclosure and market discipline; 
and the prudential treatment of banks’ assets. 
Disclosure of ESG factors is a vital tool for market 
discipline allowing stakeholders to assess banks’ 
environmental risks and their sustainable finance 
strategy. Many stakeholders have a legitimate inter­
est in the physical and transition risks that banks 
are exposed to from climate change. They also want 
to understand a banks’s strategy in financing the 
transition to a zero carbon economy. 
The EBA is asking banks to disclose information on:  
 Climate risks: how climate change may exac­
erbate other risks within banks balance sheets
whether it be the risk of stranded carbon intensive
assets or loans to property within a flood plain. 
 Mitigating actions: what mitigating actions banks
have in place to address those risks including fi­
nancing activities that reduce carbon emissions. 
 Green Asset ratio and Banking Book Taxonomy
Alignment ratio: to understand how institutions are
financing activities that will meet the publicly agreed
Paris agreement objectives of climate change miti­
gation and adaptation based on the EU taxonomy of
green activities.
The EBA is also asking banks to describe their ESG 
strategies, governance and risk management ar­
rangements with regard to ESG risks.
Why is the EBA’s 
ESG disclosure work important?
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E U R O P E A N  B A N K I N G  A U T H O R I T Y  -  F A C T S H E E T  O N  E S G  D I S C L O S U R E S
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How does the EBA expect banks to 
capture environmental risks and 
activities that reduce those risks?
The EBA will ask banks to disclose exposures to carbon 
intensive activities and assets that may experience 
physical risk as a result of climate change. In particu­
lar, it will ask banks to provide information with the 
following breakdown:
  Information towards fossil fuel companies excluded 
from sustainable climate benchmarks, 
  information towards other carbon-related sectors, as 
identified in the same sustainable climate benchmark 
Regulation.
  information on GHG emissions financed by the institution 
and on alignment of metrics with 2050 Net Zero goals.
  These disclosures are aligned with those recommend­
ed by the FSB’s TCFD, like e.g. exposures towards car­
bon-related sectors, although with a broader defini­
tion of which sectors are carbon-related. Banks are 
also encouraged to explain what measures they have 
in place to mitigate those risks such as reducing fi­
nancing activities that reduce the carbon footprint of 
currently carbon intensive activities. 
What are the Green Asset Ratio (GAR) and 
the Banking Book Taxonomy Alignment 
ratio (BTAR) and why are they important?
The GAR and the BTAR are based on the EU taxon­
omy and are actually Paris aligned ratios that can 
be used to identify whether banks are financing 
sustainable activities, such as those consistent with 
the Paris agreement goals. They show the propor­
tion of assets that are environmentally sus­tainable 
and contribute substantially to the objectives of cli­
mate change miti­gation or climate change adap­
tation or that enable other activities to contrib­ute. 
The GAR mirrors the disclosure that institutions 
will have to provide under Art 8 of Taxonomy Reg­
ulation. The BTAR provides additional information 
on the taxonomy alignment of exposures towards 
non-financial corporates not subject to NFRD dis­
closure obligations. 
The GAR and BTAR are particularly important 
in set­ting strategies as even a bank with a low 
value of these KPIs can identify how it wants to 
change its financing activities over time to meet 
the Paris agreement objectives and measure 
and monitor that strategy.
Where will banks get the data from?
The EBA has deliberately designed the KPIs on taxono­
my alignment disclosure requirements so they matche 
the data, and timelines, that large corpo­rates under the 
Non Financial reporting Directive are required to pro­
duce following Article 8 of the Taxonomy Regulation. The 
EBA also set out guidance that banks should cap­ture 
ESG information in our Loan Origination and Monitoring 
Guidelines. Information necessary for the calculation of 
the BTAR shall be obtained on a best effort basis in the 
context of the bilateral relationship with counterparties 
or when needed using estimates, without creating dis­
closure obligations to them. The EBA expect reliable data 
for the GAR from December 2023 for counterparties sub­
ject to NFRD disclosure obligations and households. And 
on the BTAR for June 2024. 
HOW DOES THE EBA’S DISCLOSURE 
FIT WITH ALL THE OTHER 
DISCLOSURE INITIATIVES? 
The EBA disclosure proposals leverage exist­
ing international and EU work including:
  following the recommendations from the 
FSBs TCFD reports. 
  using the EU Taxonomy of activities as a 
starting point. 
  relying on the data that banks’ biggest bor­
rowers subject to the Non Financial Re­
porting Directive will produce. 
  relying on data collected on bilateral basis 
as required in the EBA loan origination and 
monitoring guidelines.
Stay in touch
https://eba.europa.eu/
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© EBA, 2021
Luxembourg: Publications Office of the European Union, 2021
Reproduction is authorised provided the source is acknowledged.
ISBN 978-92-9245-753-2	
doi:10.2853/797113	
DZ-09-21-015-EN-N