Starting in 2026, savings banks and other regional financial institutions will be required to submit an ESG risk plan for the first time. This requirement is a central component of the new expectations set out in the EBA Guidelines on the management of ESG risks, the Capital Requirements Directive VI (CRD VI), and the planned German implementation via BRUBEG. Although regional institutions are expected to benefit from proportional relief, it is clear that ESG risks will become a permanent part of risk management, business strategy, and supervised bank-wide processes.
For savings banks and other regional financial institutions, this creates a particular challenge: they operate within clearly defined business territories, hold strongly regionally shaped credit portfolios, and often have limited resources in risk and sustainability functions as well as lower modelling depth compared to large banks. At the same time, supervisors expect ESG risks to be assessed in an institution-specific, transparent, and audit-proof manner.
The KPMG ESG Risk Survey 2025 illustrates the pressure to act: around 70% of banks are pursuing their ESG strategies unchanged despite geopolitical uncertainties. Of particular relevance for regional institutions are the deficiencies identified by the ECB, especially in the integration of ESG into business strategy, credit risk, risk appetite, and governance. For smaller institutions with a regional focus, these areas are decisive for a viable ESG risk plan.
What an ESG Risk Plan Should Deliver for Regional Institutions
The EBA Guidelines do not require a large-bank approach, but they do require a consistent, plausible, and institution-specific presentation. For regional institutions, four dimensions are especially important:
1. Regionality of risks
Savings banks carry ESG risks largely through their regional credit activity. Climate risks vary significantly between regions; social risks differ between urban and rural areas; governance risks may arise from regional industry structures or ownership arrangements. An ESG risk plan must reflect this regionality.
2. Proportionality instead of full-scale modelling
The EBA explicitly allows qualitative approaches for smaller institutions. This means:
- qualitative scenarios instead of full model calculations
- plausibilised exposures instead of complex climate models
- clear risk transmission pathways instead of mathematical simulation chains
What matters is not modelling depth, but the coherence of the risk narrative.
3. Focus on credit risk and more
The KPMG survey shows that institutions still narrow ESG too much to credit risk. For regional institutions, other risk categories are equally relevant:
- credit risks through changes in the creditworthiness of regional industries
- collateral risks, e.g., for real estate in flood or heat-prone areas
- strategic risks due to shifting customer demand
- reputational risks related to sustainable finance offerings
4. Integration into existing structures
Regional financial institutions have well-established risk processes and clear governance structures. An ESG risk plan should build on these structures, not replace them. It must show how ESG risks:
- become visible in risk reporting
- are embedded into ICAAP, risk strategy, and credit processes
- are coordinated between management board, risk controlling, sustainability, and back-office functions
What Regional Institutions Should Specifically Consider in 2026
Many institutions may ask: “Is a narrative ESG section within the risk strategy sufficient?”
The answer is clearly: “No”. Supervisors expect a structured, transparent document that reflects the material ESG risks of the institution.
For savings banks and other regional institutions, the following five points are therefore essential:
- Developing an institution-specific ESG risk taxonomy that reflects regional characteristics.
- Conducting a qualitative analysis of ESG transmission pathways, such as how climate policy affects regional industries or how physical risks influence specific collateral types.
- Designing a qualitative, proportionately structured scenario that shows which developments are realistically relevant for the institution.
- Creating a governance map that clearly assigns responsibilities and ensures auditability.
- Formulating a consistent risk narrative, enabling the institution to convincingly explain to supervisors why certain risks are considered material or non-material.
The Perspective of the German Savings Banks Finance Group
The DSGV, the German Savings Banks Finance Group, has long advocated for proportional regulation, including in the context of ESG risks. The association supports savings banks through technical guidelines and MaRisk interpretations to help them meet regulatory requirements. However, these documents provide orientation, not an institution-specific ESG risk story.
Yet this is precisely what supervisors increasingly expect:
- Why are certain risks relevant for this specific institution?
- How do they materialise in this specific region?
- Which governance mechanisms ensure that insights flow into decision-making and risk steering?
An ESG risk plan that convincingly answers these questions will become a central supervisory benchmark in 2026.
Conclusion: 2026 Will Be a Regulatory Milestone for Regional Institutions
For savings banks and other regional financial institutions, the ESG risk plan is not a bureaucratic requirement, but an instrument that links risk management, strategy, and transformation. The good news: supervisors do not expect perfection, but coherence, proportionality, and transparent reasoning.
Institutions that prepare purposefully in 2025 will have a clear advantage in 2026: less effort, lower supervisory risk, and stronger strategic orientation.
Need support? Arrange a non-binding initial consultation
If your regional financial institution is preparing to develop an ESG risk plan, I would be pleased to support you – structured, practice-oriented, and tailored to your institution.