On 8 May 2026, the ECB published its “Report on Good Practices for Climate and Nature-related Risk Stress Testing”, providing banks with examples of observed good practices identified during the 2022 ECB Climate Risk Stress Test (CST) and the subsequent supervisory follow up activities conducted between 2023 and 2025. 

• The ECB’s 2022 Climate Risk Stress Test marked a key milestone in strengthening climate risk management practices across the banking sector.
• The CST acted as a catalyst for banks to enhance climate stress-testing capabilities and integrate climate risks into broader risk management frameworks.
• While significant progress has been made, the ECB notes that further enhancements to frameworks and modelling approaches remain necessary.

What is the purpose and scope of the ECB's report on climate-related risk management practices? 

The report shares good practices to help banks advance their climate-related risk management approaches, including in view of upcoming EBA Guidelines. The guidance is non-binding and illustrative, serving as  a flexible reference tailored to each institution's circumstances rather than setting supervisory expectations.

What challenges remain regarding climate and nature-related data? 

The ECB identified ongoing challenges in collecting greenhouse gas emissions and Energy Performance Certificates (EPC) data. Institutions are also developing proprietary  indicators and methodologies to improve data gaps and identify counterparties highly exposed to transition  risks.

How are banks advancing climate-related transition Risk modelling?

• ECB identified good practices for counterparty-level climate risk analysis.
• Advanced models aligned more closely with the 2022 ECB stress test scenarios.
• Banks are expanding variables beyond carbon prices and sectoral indicators.
• Sector-specific climate models increasingly integrated into PD models.
• Greater use of granular, counterparty-level credit risk assessment.
• Climate risk modelling expanding from PDs to LGD estimates.

How does the updated ECB report differ from the 2022 report?

Compared with the ECB report as of 2022, the updated report expands its focus on:

• on more sophisticated physical risk modelling methodologies;
• nature-related risk stress testing approaches

The 2026 report places greater emphasis on modelling approaches for integrating climate risk into stress-testing frameworks, particularly regarding physical and nature-related risks. Tables 1–3 of the ECB report provide further details on the observed good practices.

Scope and Purpose

This publication supports institutions in strengthening their stress-testing and scenario analysis capabilities ahead of the EBA Guidelines, applicable from 1 January 2027.