EU Pillar 3 ESG Reporting: Essential Timelines and Templates Explained

Starting January 2025, the European Banking Authority’s (EBA) EU Pillar 3 ESG reporting requirements will expand to cover all EU banks. This includes approximately 2,000 Less Significant Institutions (LSIs) with a proportional approach for smaller institutions that is yet to be clarified by the regulator.

These requirements, set within the framework of the Capital Requirements Directive (CRD VI) and the Capital Requirements Regulation (CRR III), aim to bring greater transparency to the financial system by standardizing how banks disclose their environmental, social, and governance (ESG) risks.

Compliance with these requirements isn’t just about meeting regulatory obligations. Pillar 3 ESG disclosures ensure consistent, clear, and comparable ESG reporting, enabling investors and stakeholders to make informed decisions.

They also reflect a bank’s commitment to sustainable finance and strengthen its competitive edge in a market where transparency and accountability are increasingly valued.

To simplify this journey, this article covers both the most critical EU Pillar 3 deadlines and the reporting templates banks are required to use in their disclosures.

Key Deadlines for EU Pillar 3 ESG Reporting

To help banks navigate these requirements, we’ve identified the most important deadlines for ESG disclosures under EU Pillar 3. The timeline infographic below provides a clear overview of these milestones:

EU Pillar 3 ESG Reporting Timeline

2023

First Disclosures: beginning in 2023, banks were required to disclose to make their first set of annual disclosures on ESG risks with data as of the end of 2022. This included physical and transition risks.

Required Templates

2024

Green Asset Ratio (GAR): Banks are now required to disclose their GAR. The ratio reflects the share of assets that are aligned with the EU Taxonomy.

Remaining Emissions Data: From June 30, 2024, banks must disclose their Scope 3 emissions, as well as other metrics.

Banking Book Taxonomy Aligned Ratio (BTAR): From December 31, 2024, banks can also voluntarily report their BTAR.

Required Templates

2025

Expanded Scope: From January 2025, Pillar 3 will expand to include all EU banks, including over 2,000 Less Significant Institutions.

Required Templates

2026

Requirements for Smaller Institutions: During 2025, the European Banking Authority (EBA) is expected to approve the reporting regime for smaller EU institutions. We expect their first disclosures in 2026.

Data Hub Operational: EBA’s Pillar 3 Data Hub expected to be operational. This centralized platform will provide access to prudential information from all European Economic Area institutions.

Required Templates

EU Pillar 3 ESG Reporting Obligations

Pillar 3 ESG disclosures encompass a range of topics including transition risks, physical climate risks, Green Asset Ratio and Banking Book Taxonomy Alignment Ratio, and mitigating actions such as the management and governance of ESG risks. To ensure transparency and consistency in how banks report, the EBA created a set of standardized disclosure templates for banks to use (see Table 1).

Table 1. EU Pillar 3 ESG Reporting Templates

Here’s a closer look at what they mean for banks.

1. Templates 1-4: Transition Risks

These templates cover the qualitative and quantitative disclosures related to transition risks, including policy and regulation, market, and technological risks. They provide a structured approach to help banks communicate their exposure to these risks and how they are managing them.

Examples of disclosures include:

• Quantitative Metrics on Transition Risks: Exposure to sectors vulnerable to transition risks, such as fossil fuels, heavy industry, and transportation.
• Scenario Analysis: Details the outcomes of scenario analyses under different transition pathways (e.g., a 1.5°C scenario).
• Governance of Risks: Governance structure overseeing transition risks, including board-level committees, frequency of discussions, and decision-making processes.

What banks should do: Banks need comprehensive data on sectoral exposures and must be prepared to run scenario analyses to understand the impact of transition risks. They should also ensure they have clear governance processes and detailed disclosures to demonstrate accountability and correct integration of risk drivers.

2. Template 5: Physical Risks

This template focuses on disclosures related to physical risks—financial risks stemming from climate-related hazards such as extreme weather events and long-term environmental changes.

Examples of disclosures include:

• Risk Exposure: Outline exposure to acute risks (e.g. floods, hurricanes) and chronic risks (e.g. rising sea levels, temperature increases).
• Financial Impact Analysis: Quantitative and qualitative descriptions of potential financial losses due to physical risks.
• Other Risks: Assessment of how physical risks could affect credit risk, asset values, and operational continuity.

What banks should do: Geospatial analysis tools will be essential for accurately mapping exposures and identifying assets in high-risk regions. Beyond identifying these risks, banks must integrate climate resilience into their risk management practices and demonstrate proactive measures to protect assets. Effective communication of these strategies not only ensures regulatory compliance but also builds stakeholder confidence in the bank’s ability to navigate an increasingly volatile climate landscape.

3. Template 6-9: Mitigating Actions (GAR and BTAR)

By the end of 2024, banks are to report key quantitative metrics, including mandatory reporting of their Green Asset Ratio (GAR) and voluntary reporting of the Banking Book Taxonomy Alignment Ratio (BTAR):

• GAR: Measures the proportion of a bank’s assets that are aligned with the EU Taxonomy for sustainable activities. GAR provides transparency on how much of a bank’s financing supports environmentally sustainable projects.
• BTAR: Expands on GAR by covering additional assets in the banking book, those not captured under EU Taxonomy such as SMEs or Non-EU companies, offering a broader picture of sustainability alignment.

The EBA intentionally designed the KPIs to align with the Taxonomy-based disclosure requirements. This ensures consistency with the data and timelines applicable to large companies governed by the NFRD.

These ratios play a critical role in guiding strategic decisions. Even banks with low initial KPI values can use these metrics to determine how they plan to adjust their financing activities over time, aligning with the goals of the Paris Agreement and tracking their progress toward those objectives.

What Banks Should Do: Credit institutions must ensure that systems are in place to classify and measure assets against the EU Taxonomy criteria. Automated tools can simplify the process of calculating GAR and BTAR, reducing the risk of errors.

4. Template 10: Mitigating Actions (Qualitative)

This template guides banks in disclosing the actions they are taking to mitigate ESG risks, including both transition and physical risks. It provides a framework for reporting on strategies, progress, and outcomes.

Examples of disclosures include:

• Risk Reduction Strategies: The bank’s overall strategy for mitigating ESG risks, including policies for reducing exposure to high-risk sectors.
• Financing Transition Activities: Details on how the bank supports clients’ transition to sustainable practices (e.g. green bonds, sustainable loans, financing for renewable energy projects).

What banks should do: Document their current mitigation strategies and ensure they are actionable, transparent, and tied to measurable outcomes. This will demonstrate to regulators and investors that the bank is actively managing its ESG risks.

How Technology Can Simplify Pillar 3 ESG Reporting

Navigating the complexities of EU Pillar 3 Reporting deadlines can be challenging, especially as requirements continue to evolve. Fortunately, technology can play a pivotal role in simplifying the process.

• Streamlining ESG Data Sourcing Across Diverse Sources: Automated reporting solutions streamline data aggregation from multiple sources, ensuring comprehensive coverage of publicly and non-publicly reported ESG information. Additionally, AI-driven solutions can fill data gaps through estimation models, particularly for entities that lack detailed disclosures.
• Reducing the Manual Effort and Cost of Data Integration: Automated data ingestion streamlines the collection process, minimizing manual effort and improving accuracy. This automation, combined with unified platforms that integrate seamlessly with existing risk management and reporting systems, reduces the need for manual intervention and ensures consistency. Additionally, cloud-based solutions enable real-time data updates, enhancing efficiency and scalability throughout the reporting process.
• Enhancing Granularity and Coverage of ESG Benchmarks: Sophisticated data platforms provide granular insights into benchmarks, including thresholds for key metrics (e.g., thermal coal exposure >1%). These technology-driven solutions allow for greater data coverage, extending to tens of thousands of entities and ensuring comprehensive reporting across Scope 1, 2, and 3 emissions. With frequent, automated updates, AI-powered platforms ensure that lists of high emitters remain current, allowing banks to manage their risks proactively.
• Breaking Down Data Silos: ESG data is often fragmented across different providers, leading to inconsistent methodologies and making it difficult to achieve a unified view of ESG risks. Centralized platforms address this by unifying data from multiple sources, applying consistent methodologies to ensure coherence. By establishing a single source of truth, these platforms reduce discrepancies, improve data reliability, and enhance the quality of decision-making.

By incorporating the right tools, banks can stay ahead of deadlines and focus on strategic ESG initiatives rather than getting bogged down by administrative tasks.

Driving Leadership in Sustainable Finance

Meeting EU Pillar 3 reporting deadlines is essential for maintaining regulatory compliance and positioning banks as leaders in sustainable finance. This guide serves as a practical resource to stay on track and plan ahead.

For banks aiming to streamline reporting processes, automated solutions provide an efficient way to meet deadlines and ensure accuracy.

Discover how Clarity AI’s solutions support institutions in achieving compliance and preparing for the future of ESG reporting.