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BaFin guidance on sustainability risks – A practitioner’s view

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Sudalaimuthu Gurusamy

Domain Consultant, Risk Management Practice, Banking, Financial Services, and Insurance, TCS

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Implementing BaFin guidance on climate and sustainability risks

Climate-related financial risks are considered a cross-cutting risk category, causing impacts across existing risk types, including credit, market, operational, and reputational risks.

Globally, financial regulators require banks to integrate climate-related risks into risk identifications, management, and control processes.

Depending on the organization’s size and maturity of their current risk management frameworks, firms can consider more granular mapping as part of impact assessment. Implementation of BaFin guidance requires supervisory entities to develop key capabilities that impact data, process, technology, and culture. Below core aspects need to be considered when firms implement regulations on sustainability risks. 

  • Understanding the wider impact on the ERM framework

  • Materiality assessment of impacts

  • Overlap with TCFD guidance

  • Capability gap analysis and reporting

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