What are the EBA Pillar III Disclosures?
The EBA Pillar III Disclosures are a set of reporting requirements for banks and financial institutions to disclose information about their capital and risk exposures.
The requirements are part of the EBA's wider regulatory framework which aims to introduce comparable disclosures and KPIs as a tool to highlight how European banks are embedding sustainability considerations into their risk management, strategy, and business models, as well as their pathway towards the Paris Agreement goals. Reporting obligations include*.
- Climate risks: how climate change and climate change transition risks may exacerbate other risks within a bank's balance sheet.
- Mitigating actions: what actions are banks taking to address physical and transition climate-related risks?
- Green Asset Ratio (GAR) and Banking Book Taxonomy Alignment Ratio (BTAR): how banks are funding activities that align with the Paris Agreement's climate goals, using the EU's Taxonomy of green activities.
- Strategies, governance, and risk management of ESG Risks.
How Morningstar Sustainalytics Can Help Banks Comply with EBA Pillar III Disclosure Requirements
Morningstar Sustainalytics offers banks operating in Europe comprehensive solutions to help them comply with the Pillar III disclosure requirements.
Various tables, templates and associated instructions have been introduced to facilitate EBA Pillar III disclosures, capturing both qualitative and quantitative data. To support banks in using our data, Morningstar Sustainalytics has produced a mapping file which lists the data that is relevant for each of the Pillar III Tables and Templates. Our flexible delivery capabilities ensure banks can seamlessly integrate the vast amount of research and data that underpin our ESG Solutions.
Leveraging our Pillar III data solutions, European banks can define targets, limits and policies to manage E, S and G risks, understand the transitional and physical climate risks faced by their counterparties and gain a deep understanding of the EU Taxonomy eligibility and alignment of their banking book and Green Asset Ratio.
Manage climate related risks by disclosing information on banking book exposures to chronic and acute climate-related hazards. With our Physical Climate Risk Metrics solution, you get extensive issuer and asset coverage – over 12,000 issuers with over 12 million assets and facilities.
Evaluate how companies are managing their transition to a low carbon economy, using our Low Carbon Transition Rating. The rating provides a single metric indicating whether a company is aligned or misaligned to meeting net-zero goals by 2050.
Identify exposures towards NFRD & non-NFRD corporates taxonomy-aligned activities using our best-in-class EU Taxonomy. The data is delineated by the overarching activity types of enabling, transitional and adapting as required within the banking templates.
How the datasets could be used to integrate ESG and climate risks
Set objectives, targets and limits using a range of ESG metrics and monitor improvements over time.
Assess transition risks in banks' portfolio, including collaterals, as well as the exposure to fossil fuel companies and scope 1, 2 and 3 carbon emissions.
Quantitatively assess which exposures are sensitive to impact from climate change physical events, as required within the template.
Analyze exposures to Taxonomy aligned investments in both NFRD and non-NFRD corporates using our industry leading EU Taxonomy Solution. The data is delineated by the overarching activity types of enabling, transitional and adapting as required within the banking templates.
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