The EBA is mandated in accordance with Article 87a(5) of Directive 2013/36/EU to issue guidelines on minimum standards and reference methodologies for the identification, measurement, management and monitoring of environmental, social and governance (ESG) risks by institutions. ESG risks, in particular environmental risks through transition and physical risk drivers, pose challenges to the safety and soundness of institutions and may affect all traditional categories of financial risks to which they are exposed. To ensure the resilience of the business model and risk profile of institutions in the short, medium and long term, the guidelines set requirements for the internal processes and ESG risk management arrangements that institutions should have in place. Institutions, based on regular and comprehensive materiality assessments of ESG risks, should ensure that they are able to properly identify and measure ESG risks through sound data processes and a combination of methodologies, including exposure-, portfolio- and sector-based, portfolio alignment and scenario-based methodologies. Institutions should integrate ESG risks into their regular risk management framework by considering their role as potential drivers of all traditional categories of financial risks, including credit, market, operational, reputational, liquidity, business model, and concentration risks. Institutions should have a robust and sound approach to managing and mitigating ESG risks over the short, medium and long term, including a time horizon of at least 10 years, and should apply a range of risk management tools including engagement with counterparties. Institutions should embed ESG risks in their regular processes including in the risk appetite, internal controls and ICAAP. Besides, institutions should monitor ESG risks through effective internal reporting frameworks and a range of backward- and forward-looking ESG risk metrics and indicators. Institutions should develop specific plans to address the risks arising from the transition and process of adjustment of the economy towards the regulatory objectives related to ESG factors of the jurisdictions they operate in. To this end, institutions should assess and embed forward-looking ESG risk considerations in their strategies, policies and risk management processes through transition planning considering short-, medium- and long-term time horizons. CRD-based plans take a risk based view and contribute to the overall resilience of institutions towards ESG risks and should be consistent with transition plans prepared or disclosed by institutions under other pieces of EU legislation.