February ESG monthly Newsletter

Key highlights:

ESG REGULATORY UPDATES

EBA: Final Report – Guidelines on the management of ESG risks

  • The EBA guidelines set minimum standards for incorporating ESG risks into financial institutions’ frameworks using materiality assessments and scenario-based methodologies
  • Institutions must integrate ESG risks into governance structures, risk appetite, and internal processes like the Internal Capital Adequacy Assessment Process (ICAAP)
  • Institutions are required to establish measurable targets, timelines, and milestones to support EU climate goals, including achieving net-zero emissions by 2050
  • Smaller institutions can adopt less complex approaches while still addressing material ESG risks
  • Methodologies, data processes, and strategies should be regularly updated as ESG risk management evolves. The guidelines will take effect in January 2026

EBA: Consultation Paper – Draft Guidelines on ESG Scenario Analysis

  • The EBA’s draft guidelines propose incorporating ESG scenario analysis into risk management frameworks to assess resilience to climate and other ESG risks
  • The guidelines address defining the use of scenario analysis, setting criteria for credible scenarios, and identifying ESG risks’ financial impacts
  • They introduce Climate Stress Tests (CST) for short-term risks and Climate Resilience Analysis (CRA) for long-term business model sustainability
    Institutions are encouraged to adopt a gradual, proportional approach based on their size and complexity
  • Given the early stage of ESG integration, the guidelines prioritize climate risks, advocating the use of credible international models while allowing flexibility as data and methodologies evolve

 

INSIGHTFUL ESG RESEARCH

Morningstar: Global Sustainable Fund Flows: Q4 2024 in Review

  • In Q4 2024, total European investment funds recorded approximately $173 bn of inflows
  • European sustainable funds attracted $18.5 bn in net inflows with almost all contributions coming from passive funds
  • At the end of Q4 2024, total AUM of European sustainable funds stood at approx. $2,700 bn, with a market share of 84%, reflecting its pivotal role in the global sustainable fund landscape

Morningstar: SFDR Article 8 and Article 9 Funds: Q4 2024 in Review

  • In Q4 2024, Art. 8 and Art. 9 funds accounted for 57% of the total number of funds launched in the EU
  • Art. 8 funds recorded €52 bn of inflows in Q4 2024, marking the highest quarterly inflows since the fourth quarter of 2021
  • Art. 8 and Art. 9 AuM funds stood at €6.1 trn at the end of December 2024, maintaining the share to 60% of the EU funds

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