European Commission puts out tender for study looking at integrating ESG into banking rules

Controversial ‘green supporting factor’ for banks at heart of EU sustainability plan

The European Commission’s financial services directorate has put out a tender for a study on “tools and mechanisms” to integrate ESG factors into the EU’s banking sector and prudential framework, as part of its Action Plan on Sustainable Finance.

The contract notice calls for a study into the “development of tools and mechanisms for the integration of ESG factors into the EU Banking Prudential Framework and into banks’ business strategies and investment policies”.

At the heart of the EU’s plans is the controversial “green supporting factor”, i.e. changes to capital requirements to facilitate climate investments, though this isn’t mentioned in the tender.

It is being overseen by the Directorate General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA), the department responsible for EU policy on banking and finance.

The successful tenderer for the 12-month, €550,000 contract will deliver:

  • Identification and stocktaking of best practices/principles for the integration of ESG risks into EU banks’ risk management processes;
  • Identification and stocktaking of best practices/principles for the integration of ESG risks into EU prudential supervision;
  • Analysis of the impediments to the development of a well-functioning EU market for green finance and sustainable investment and the identification of appropriate instruments and strategies to promote the scaling-up of green finance and of the market for sustainable financial products.The deadline for applications is October 9 and it will be decided on a best price-quality ratio.

A spokesperson for the Commission told RI that she was unable to provide further details on the tender or the type of firm the EU was looking for until the contract has been awarded.

But she did confirm that it forms part of Action 8 of the Action Plan on ‘Incorporating sustainability in prudential requirements’.

Under this, the Commission states that it will explore the “feasibility of the inclusion of risks associated with climate and other environmental factors in institutions’ risk management policies” and the “potential calibration of capital requirements of banks as part of the Capital Requirement Regulation and Directive”.

EU regulators the European Insurance and Occupational Pensions Authority (EIOPA) and the European Banking Authority (EBA) were charged with looking into the incorporation of sustainability into the prudential treatment of assets and liabilities by insurers and banks, respectively – the so- called ‘green supporting factor’ – as part of the Action Plan.

EIOPA was given until the end of September to deliver its opinion and the EBA was given six years.

In June, EIOPA launched a consultation on its draft opinion on incorporating sustainability within the EU’s Solvency II legislation. That consultation closed on last month.