CRD VI Transition Plan – New Requirements under CRD and KWG

With the implementation of the Capital Requirements Directive VI (CRD VI) and the planned amendments to the German Banking Act (KWG), the CRD VI transition plan, the KWG ‚ESG Risk Plan‘, and measures for effective management of ESG risks are coming increasingly into focus of legal and regulatory requirements. The objective of the directive is, among other things, to introduce provisions for improving the handling of ESG risks, particularly climate risks. The current government draft for implementing CRD VI in Germany foresees a 1-to-1 implementation of the EU banking package – with far-reaching consequences for institutions.

CRD VI Transition Plan: What does Article 76 of CRD VI require?

Article 76 of the directive obliges the management bodies of institutions to develop a specific CRD VI transition plan to monitor and address ESG risks and to oversee their implementation. These plans must:

contain quantifiable targets,
define processes for monitoring and managing financial risks from ESG factors,
take into account short-, medium-, and long-term risks – particularly in the context of the EU-wide transition to climate neutrality,
be aligned with the goals of the EU and, where applicable, third countries,
be based on the latest reports of the European Scientific Advisory Board on Climate Change,
be consistent with the disclosure plans pursuant to Directive 2013/34/EU.

‚ESG Risk Plan‘ and Management of ESG Risks: Implementation into German Law

The German government draft specifies these requirements through the proposed amendments to the KWG. Within this framework, § 26c ‚ESG Risks in Risk Management‘ and § 26d ‚ESG Risk Plan‘ are to be incorporated into the KWG.

§ 26c KWG-E: ESG Risks in Risk Management

§ 26c KWG-E obliges institutions to systematically integrate ESG risks into their risk management. The requirements specify how environmental, social, and governance factors are to be considered across different time horizons – short-, medium-, and long-term (at least 10 years).

Key requirements at a glance:

ESG Risk Plan: A mandatory component of the risk strategy is an ESG Risk Plan pursuant to § 26d KWG-E.
Regular review: Strategies and processes for considering ESG risks must be evaluated at least every two years – even for small, non-complex institutions.
Integration into risk management processes: ESG risks must be explicitly included in procedures for risk identification and assessment.
Process quality: The processes must be appropriate to the nature, scope, and complexity of ESG risks.
Technical and human resources: Institutions must have adequate resources to manage and monitor ESG risks.
Remuneration systems: These must reflect the institution’s risk appetite regarding ESG risks.

Additionally, requirements apply regarding the professional qualifications of management: they must understand ESG risks and incorporate them into strategic decisions. Overall strategy, risk strategy, risk inventory, and stress tests must consider ESG risks – particularly in setting objectives, principles, metrics, and limits for managing ESG risks. Furthermore, the risk committee must consider ESG risks when reviewing remuneration incentives.

§ 26d KWG-E: ESG Risk Plan

§ 26d KWG-E obliges the management of institutions to prepare a specific ESG Risk Plan. This plan should ensure the systematic monitoring and management of ESG risks and be embedded in the institution’s strategic planning.

Key requirements:

Comprehensive risk coverage: The plan must address financial risks from environmental, social, and governance factors – including risks from regulatory adjustment processes at the EU, national, and, where applicable, international levels.
Long-term perspective: ESG risks must be considered over short-, medium-, and long-term horizons of at least 10 years.
Target orientation: The plan must contain appropriate, quantifiable targets and metrics for managing ESG risks – aligned with the institution’s business model and scope of activities.
Scientific foundation: The targets and procedures must be based on the latest reports and recommendations of the European Scientific Advisory Board on Climate Change, particularly regarding EU climate objectives.
Consistency with disclosure obligations: The ESG Risk Plan must be consistent with other information to be disclosed by the institution.

For significant institutions (SIs), this obligation applies from January 11, 2026, and for small and non-complex institutions (SNCIs) from January 11, 2027.

Other sections of the KWG are also being amended, including:

§ 6b KWG-E: Consideration of ESG risks and ESG Risk Plans in supervisory reviews,
§ 24 KWG-E: Notification requirement for management approval of an ESG Risk Plan.

Do you need support in implementing the new requirements? Contact us – we advise you with our expertise.

Transition Plan as a Strategic Instrument

While the focus of the requirements under CRD VI and the planned KWG amendments lies on plans for managing ESG risks – i.e., on developing risk-based transition plans or so-called ‚Prudential Transition Plans‘ – transition plans are considered within the framework of the CSRD and CSDDD as a ’strategic tool‘ for successfully shaping ecological change.

They are strategic roadmaps that show how companies can achieve their sustainability goals while managing risks from climate change – both from the perspective of impacts on the environment (‚inside-out”) and risks to the company (‚outside-in‘).

Objectives of transition plans:

Manage the transition to a more sustainable economy through concrete steps and timelines,
Manage risks arising from regulatory, economic, and climatic changes,
Accountability and progress tracking based on measurable targets,
Transparent disclosure to investors and the public,
Compliance with political and regulatory requirements.

Would you like to know what a transition plan can look like in practice? Contact us – we provide individual and practical advice.

Embedding into Regulatory Frameworks: CRD, CRR, EBA and more

In addition to CRD VI, other legal and regulatory frameworks are relevant – with CRR and EBA, like CRD VI, focusing on risk-based transition plans:

CRR, Art. 449a: Disclosure requirement for transition plans aligned with the Paris Agreement,
EBA Guidelines: Requirements for preparing sound transition plans with quantifiable targets for managing transition risks through scenario analyses and stress testing,
CSRD & ESRS E1: Disclosure requirements for climate transition plans, including targets for reducing greenhouse gas emissions and measures to mitigate climate change,
CSDDD, Art. 15: Requirement to implement transition plans in line with limiting global warming to 1.5°C and the Paris Agreement,
NGFS & TCFD: Recommendations for governance and structuring of transition plans.

Best Practice: The TPT Gold Standard

The UK TPT Framework provides a comprehensive disclosure framework for credible climate transition plans. It comprises five core elements:

Foundations: Strategic ambitions, business model, external factors,
Implementation strategy: Business activities, products, financial planning,
Engagement strategy: Collaboration with stakeholders,
Metrics & targets: Governance, emissions, financial indicators,
Governance: Oversight, accountability, culture, and competencies.

Act Now

The new requirements from CRD VI and the KWG make it clear: ESG Risk Plans and transition strategies will not only be legally and regulatorily mandatory, but also strategically crucial. They form the foundation for a sustainable business strategy and forward-looking risk management. ADVANTA provides comprehensiv support in developing, implementing, and validating your ESG Risk Plans – from the initial analysis to final approval by management. Contact us!