Regulatory Alerts2020-01-15
Guidance Notice on Dealing with Sustainability Risks
The Federal Financial Supervisory Authority (BaFin) issued this non-binding Guidance Notice to establish good practice principles for integrating environmental, social, and governance (ESG) risks into the strategies and risk management frameworks of supervised financial entities. Supervised institutions, including banks, insurers, pension funds, and asset managers, must ensure the management board assumes overall responsibility for identifying, assessing, and documenting sustainability risks while applying proportionality to their specific business models. The notice mandates the incorporation of physical and transition risks into risk identification, stress testing, scenario analyses, and corporate governance structures without altering existing statutory requirements.