Recital 39

(39) The long-term nature and the profoundness of the transition towards a sustainable, climate-neutral and circular economy will entail significant changes in the business models of institutions. The adequate adjustment of the financial sector, and of credit institutions in particular, is necessary to achieve the objective of net-zero greenhouse gas emissions in the Union’s economy by 2050, while keeping the inherent risks under control. Competent authorities should, therefore, be enabled to assess that process of adjustment and to intervene in cases where institutions manage climate risks, as well as risks arising from environmental degradation and biodiversity loss, in a way that endangers the stability of the individual institutions, or financial stability overall. Competent authorities should also monitor and be empowered to act where there are risks arising from transition trends in the context of the relevant Union and Member States regulatory objectives in relation to ESG factors, for example as set out in Regulation (EU) 2021/1119 of the European Parliament and of the Council (14), the communication of the Commission of 14 July 2021 entitled ‘Fit for 55’: delivering the EU’s 2030 Climate Target on the way to climate neutrality’ (the ‘Fit for 55 package’) and the Kunming-Montreal Global Biodiversity Framework, adopted on 19 December 2022 by the Conference of the Parties to the Convention on Biological Diversity of the United Nations, as well as, where relevant for internationally active institutions, third-country legal and regulatory objectives, resulting in risks to their business models and strategies, or to financial stability. Competent authorities should also be empowered to reinforce targets, measures and actions of institutions’ prudential plans where they are considered insufficient to address the ESG risks in the short-, medium- and long-term time horizon and could in that regard pose material risks to their solvability. Climate risks and, more broadly, environmental risks, should be considered together with social risks and governance risks under a single category of risk to enable a comprehensive and coordinated integration of those factors, as they are often intertwined. ESG risks are closely linked with the concept of sustainability, as ESG factors represent the three main pillars of sustainability.

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Source: EUR-Lex CELLAR · retrieved 2026-09-04 · Text as adopted (Official Journal); later amendments are not incorporated in this text.