Why 11th of January is a game changer for European banks

11th of January 2026 distinguishes itself from other important ESG-deadlines, roadmaps and ambitions. This Sunday, EUs new regulations on Capital Requirements (CRD6) + the European Banking Authority’s (EBA) guidelines on the management of ESG risks becomes applicable.

“The biggest date that is coming is 11th of January 2026, and I think we should mark this date in the calendar.” - Dorota Wojnar, Head of ESG Risks unit at EBA.

Two set of rules that are tightly knit together, enters into effect on the same date with one clear message: ESG-risks goes beyond reporting to be a core component in banks’ risk management.

Core components in the EBA guidelines and CRD6

CRD6 + EBA Guidelines turn ESG risk from a reporting topic into a governed, forward-looking, capital-relevant risk discipline with real consequences for banks and real estate portfolios. These are the five key take aways you need to be aware of:

ESG risk becomes a governance and strategy responsibility
Forward-looking analysis and scenarios are mandatory
Data quality, documentation and auditability are non-negotiable.
ESG risks must be translated into financial risk categories.
1. Institutions must show how physical & transition risks affect:
  1. credit risk,
  2. market risk,
  3. operational risk,
  4. liquidity and funding risk (where relevant)
ESG risks must be reflected in capital, ICAAP and collateral valuation.
1. Collateral valuations can only be relied upon if ESG risks are properly reflected.

Check out the example below to learn how these elements can play out in financing commercial real estate 👇

A practical example for real estate lending

Consider a bank assessing a long-term loan secured on a commercial property.

Under CRD6 and the EBA Guidelines, it is no longer sufficient to note that the asset “has ESG risk” or to rely on historical performance and current insurance coverage. The bank must demonstrate how ESG risk materially affects the financial risk profile of the loan — today and over time.

In practice, this means:

Physical risk (e.g. flooding or extreme rainfall) must be assessed at asset and location level and translated into potential impacts on:
- cash flows (business interruption, higher operating costs),
- collateral value (damage frequency, higher maintenance capex),
- and ultimately credit risk (PD and LGD).
Transition risk (e.g. stricter energy performance requirements or carbon pricing) must be reflected in:
- future capex needs to maintain lettability and compliance,
- tenant demand and vacancy risk,
- and long-term value of the asset as collateral.

These effects must then be embedded in the bank’s core risk framework:

reflected in credit decisions and pricing,
included in forward-looking scenario analysis and ICAAP,
and supported by data, assumptions and documentation that can withstand supervisory review.

Crucially, CRD6 clarifies that collateral valuations can only be relied upon if ESG risks are properly reflected. If climate and transition risks are not credibly assessed, the collateral may be discounted which increases the perceived risk and capital impact of the exposure.

What about property insurance?

Today, banks often rely on the presence of insurance coverage to assess whether climate risk is sufficiently mitigated and, in effect, transferred away from their balance sheets.

However, as Dorota Wojnar at the EBA points out, relying on insurance is not necessarily considered a mitigating factor by regulators. From a supervisory perspective, this approach may simply move the risk from one pocket to another, rather than reducing it.

Ultimately, this does not eliminate the underlying financial risk. Under the revised regulatory framework, macroprudential authorities therefore have the ability to use capital buffers to explicitly address climate-related risks where they are deemed systemically relevant.

How to get started

There are several ways to attack the challenges imposed by the new rules. One of them is to use software companies such as Telescope. Telescope assists this process helping banks in the following way:

Exposure analysis, screening of the portfolio to find out where and which risks are most material with climate data aligned with EBAs expectations. The output of the exposure analysis is essential to decide the banks’ risk apetite, which informs credit processes, collateral valuation and ICAAP processes.

11th of January is a game-changer

The new regime changes the game, and makes it clear for everyone that climate risk = financial risks as institutions should embed ESG risks in their regular processes including in the risk appetite, internal controls and ICAAP.

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