EBA transition plans: ESG implementation will be mandatory from 2026

From 2026, new binding requirements from the European Banking Authority (EBA) will apply to credit institutions and other financial market participants: transition plans to take ESG risks into account will become a regulatory requirement.

The EBA's final guidelines specify for the first time which elements such a plan must contain – from governance issues and capital allocation to integration into risk management. Our latest white paper, "Banks between ESG strategy and risk management: Successfully implementing EBA transition plans in regulatory change" provides a systematic overview of these requirements and places them in the context of parallel regulatory strands such as the Corporate Sustainability Reporting Directive (CSRD).

Regulatory framework for transition plans

Transition plans will be part of the Supervisory Review and Evaluation Process (SREP) going forward. In doing so, the EBA explicitly links sustainability and climate strategies to banks' capital adequacy and business model analysis.

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The key requirements of the EBA are:

Structured target paths and intermediate targets

Setting short-, medium- and long-term time horizons
Governance and integration

Strategic control by management, integration into business and risk strategy
Transparency and disclosure

Disclosure requirements in line with CSRD standards
Financial resource allocation

Allocation of financial resources for the implementation of the objectives
Customer engagement

Analysis of customers' ability to implement their own transition plans

Integration into existing ESG regulation

The white paper shows how the EBA guidelines fit into existing regulations. Transition plans represent an operational interface – particularly between ESG risk supervision and ESG disclosure. Compliance with the CSRD is essential in this regard.

Financial institutions should view transition plans not only as a reporting obligation, but also as a management tool: in future, they will form the basis for strategic capital decisions and the alignment of business models with long-term sustainability goals.

Recommendations for implementation

The analysis in the white paper shows that a purely formal implementation of the requirements is insufficient. Rather, the development of transition plans in accordance with EBA requirements requires: