Main features of reference methodologies for the identification and

Institutions’ internal procedures should provide for a combination of risk assessment methodologies, including exposure-based, sector-based, portfolio-based, and scenario-based methodologies, as set out in paragraphs 31 to 42. The combination of methodologies should be put together in a way that allows institutions to comprehensively assess ESG risks over all relevant time horizons. In particular, institutions should at least use exposure-based methods to obtain a short-term view of how ESG risks are impacting the risk profile and the profitability of their counterparties, use sector-based, portfolio-based and scenario-based methods to support the medium-term planning process and the definition of risk limits and risk appetite for steering the institution towards its strategic objectives, and assess through scenario-based methods their sensitivities to ESG risks across different time horizons including long-term ones.