How lenders are dealing with ESG issues

Here’s a note from Tamara Close about this survey:

A new survey is out from Bain and the International Association of Credit Portfolio Managers (IACPM) of 55 institutions with over $40trn in assets.

Despite across the board commitments to net zero targets:
– 40% of lenders do not embed accountability for ESG or climate within their business lines
– 65% had not created a primary role that is accountable for identifying and addressing climate risks within their operations
– 55% said there are still unclear roles and responsibilities for managing climate risk between their companies’ business and corporate functions

That being said, the pressure will not diminish, as:
– 83% expect more influence from regulators
– 67% expect more influence from customers
– 53% per cent expect more influence from shareholders

The study also identified 4 ways areas in which banks could improve their performance and create value from ESG:

1. Managing stakeholders to align views in support of decarbonization. Financial institutions will want to align external and internal expectations on how to realize value creation from ESG

2. Making decisions on transition finance priorities. Financial institutions must sharply define decision rights so that they can effectively execute their strategy

3. Defining strategies to address customer demand. In the transition to decarbonization, the leaders will be those financial institutions that heed the logic of the business and customers’ priorities

4. Augmenting climate-risk data analytics capabilities. Integrating climate risk factors into core banking processes and pursuing sound governance practices will make value creation more sustainable over the long term