EN
L 324/20
Official Journal of the European Union
19.12.2022
Legal references and instructions Row number
Explanation
Business strategy and processes (a)
In accordance with Article 449a of Regulation (EU) No 575/2013 in conjunction with Article 435(1), points (a) and (e), of that Regulation, institutions shall describe how their business model, strategy, processes and financial planning integrate risks stemming from social factors (i.e. social risks) and how those risk evolve over time given changing technology, policy framework, business environment and stakeholders’ preferences.
(b)
In accordance with Article 449a of Regulation (EU) No 575/2013 in conjunction with Article 435(1), point (a) and points (c) to (f), of that Regulation, institutions shall provide a description of their objectives, targets and limits for the assessment and management of social risks, and a description of the processes they use to set out those objectives, targets and limits.
Institutions are to explain the linkages of those objectives, targets and limits to the applicable international and Union policy framework and to available benchmarks.
Social aspects include human rights violation, labour rights, income inequality, lack of human rights, customer safety and protection, privacy, poverty and non-discrimination.
Furthermore, climate change and transition to low carbon economy have social impacts that include changes to the job market.
These include the decrease in the demand for certain jobs and skills, the emergence of new jobs and skills, consumers’ changing preferences, shareholders’ willingness to swiftly integrate climate, environmental and social changes in their companies, as set out in paragraph 78 of the EBA report adopted under Article 98(8) of Directive 2013/36/EU.
(c)
In accordance with Article 449a Regulation (EU) No 575/2013, in conjunction with Article 435(1), point (d), of that Regulation, institutions shall describe how they take measures to mitigate risks associated with social factors, including understanding the counterparties’ capacity to manage social risks and entering into a dialogue with them to mitigate social risks.
Governance
(d)
In accordance with Article 449a of Regulation (EU) No 575/2013, in conjunction with Article 435(1), point (b), and Article 435(2), points (a), (b) and (c), of that Regulation, institutions shall describe how their management body is involved in the supervision and management of social risks.
That information shall cover the rationale of the approach taken by the management body and take into account a number of social factors.
Those factors include the institution’s engagement towards the community and society, its relationships with employees and compliance with labour standards, customer protection and product responsibility, and human rights.
(e)
In accordance with Article 449a of Regulation (EU) No 575/2013, in conjunction with Article 435(2), points (a), (b) and (c), of that Regulation, institutions shall describe how they organise their risk committees and how they allocate tasks and responsibilities in the risk management framework to monitor and manage social risks.
Institutions shall provide information on both their internal and external resources devoted to the assessment of social risks.
(f)
In accordance with Article 449a of Regulation (EU) No 575/2013, in conjunction with Article 435(2), point (e), of that Regulation, institutions shall describe how they include social risks into their internal reporting framework and structure, and set out the frequency of their internal reporting and information exchange on social risks.
(g)
In accordance with Article 449a of Regulation (EU) No 575/2013, in conjunction with Article 435(2), point (e), of that Regulation, institutions shall provide information on whether social risks are included in their remuneration policy, as well as on the criteria and metrics used to determine the impact of social risk considerations on variable remunerations.