Find out more in our survey how financial institutions can assess their position compared to their peers.
Environmental, social and governance risks, generally referred to as ESG risks, have attracted a great deal of attention in the last few years, from both the public and regulators. This makes it increasingly important for banks to integrate ESG in their risk management framework.
By now, an increasing number of financial institutions had begun to integrate such risks into their business models, although they face challenges in disclosing and reporting them to the relevant authorities as the requirements that apply have become stricter and more precise.
Well, in practice, how do banks do this? Are they succeeding in incorporating regulatory expectations in their risk management framework? The ECB released a survey in March 2022 in which all systemically important financial institutions (SIs) directly supervised by the ECB had to outline their progress with regard to ESG risks.
To assist the participating banks in this process with more in-depth insights, we have developed a benchmark survey that is largely based on the ECB survey but also includes additional topics. We included the survey responses from the 33 financial institutions in our English-language whitepaper: "ESG Risk Management in Banks".
The survey’s main focus is on the ECB's 13 supervisory expectations regarding climate and environmental risks in a bank’s strategy and organization, overall risk management and framework, internal and external reporting, as well as risk regarding type-specific expectations.
In general, banks prioritize climate-related risks to a particularly high degree, while they place less emphasis on environmental risks (e.g., biodiversity loss), social risks, and governance risks, to varying degrees.
Possible reasons include the increasingly complex cause-and-effect relationships related to environmental and social risks in contrast to climate-related risks. Consequently, it may be harder banks to understand these risks and to embed them in their risk management.
All insights and potential action areas are presented in our whitepaper: "ESG Risk Management in Banks".
How can banks review the integration of ESG factors into their risk management?
