Sustainable Finance in Banking

Climate change, social inequalities, and irresponsible corporate governance have arrived prominently in public awareness. At the same time, demand for sustainable financial products is increasing significantly on the investor side. The sustainability of banks' businesses and internal practices increasingly has an (in)indirect impact on their reputation and business success.

On the political-regulatory level, the adoption of the 17 UN Sustainable Development Goals and the Paris Climate Agreement laid the foundation for further initiatives on the European (EU Sustainable Finance Action Plan) and national level (e.g. BaFin leaflet on dealing with sustainability risks).

This combination of market changes and regulatory/political initiatives has a direct impact on the banking industry and leads to a comprehensive need for strategic and operational action with regard to both dealing with the effects of one's own business activities (impact) and considering sustainability risks from business activities (risk):

• Considering sustainability (impact and risk) in business strategy, organisation, governance and external image
• Reviewing and, if necessary, adapting the product/service and customer portfolio, especially with a view to possible sustainability risks and opportunities through sustainable products
• Establishing a bank-wide consistent taxonomy of sustainable economic activities as a basis for offering sustainable products
• Identifying sustainable assets and offering sustainable financing
• Refinancing through sustainable instruments and distributing sustainable products
• Identifying sustainability risks, particularly due to climate change
• Integrating sustainability (risks) into pricing and risk management
• Considering sustainability aspects in distribution (e.g. through MiFID II, Disclosure Regulation)
• Reporting own sustainability risks and impact to supervisory authorities and stakeholders within the framework of mandatory requirements and voluntary initiatives

The coordinated and complete consideration of all sustainability aspects relevant to a bank is complex, but critical to success due to the importance of the topic and the numerous interactions and synergy potentials when adapting business strategy and processes.

With our Sustainable Finance Hub in Banking, we support your institution with all issues from a single source, from raising awareness in your organisation to developing a market- and needs-oriented target vision and implementing it. Get in touch!