The European Banking Authority stated that while the availability and accessibility of environmental, social and governance data had improved, the overall ESG data landscape remained incomplete. In its report on 24 February 2025, the EBA assessed the current state of ESG data and examined the feasibility of introducing a standardised methodology for identifying and qualifying credit exposures to ESG risks.

The EBA noted that key policy initiatives, including the corporate sustainability reporting directive (CSRD) and the European sustainability reporting standards (ESRS), were expected to enhance transparency and improve the reliability of ESG data. It also stated that further transparency in the methodologies of ESG scores and external credit assessment institutions’ (Ecai) credit risk ratings could help address existing challenges in data quality and availability.

The report highlighted that credit institutions had increasingly incorporated ESG risks into their assessments, although progress varied across different exposure classes. Data availability, quality and granularity were identified as key challenges in advancing more sophisticated methodologies for ESG risk assessment.

According to the EBA, methodologies were most developed in the assessment of transition risk within corporate portfolios. Some degree of standardisation had emerged, particularly through the use of sectoral classification, greenhouse gas emissions and counterparties’ transition plans as primary sources of information.

A similar trend was observed in the methodologies applied to mortgage exposures, where ESG risk assessments typically considered factors such as geographical location and the energy efficiency of the underlying property collateral. However, the EBA found that methodologies remained less advanced for other exposure classes, with the development of relevant assessment frameworks still in progress. The evaluation of environmental risks beyond climate, as well as social and governance risks, remained at an early stage and was largely qualitative in nature.

While there were emerging practices in assessing ESG risks, limited progress had been made in determining their direct impact on credit risk, the report noted. At this stage, only a few institutions had adopted specific methods for measuring credit risk associated with ESG factors, with a primary focus on climate risk. Governance aspects had traditionally been included in credit risk assessments by institutions and ECAIs, but the EBA noted that approaches in this area lacked standardisation and were largely based on expert judgement.

Based on its review of market practices and the current data landscape, the EBA concluded that “the feasibility of designing a standardised methodology differs greatly depending on the type of exposures and risks considered.” While progress had been made in identifying and assessing ESG risks, there was still insufficient evidence to determine their precise impact on credit risk parameters. The EBA suggested that any regulatory efforts to establish standardised methodologies would likely require a sequenced approach to account for these complexities.

The 106-page report is available .