Challenges of integrating an ESG approach into lending

  • ESG considerations help reduce operational costs, as they emphasise factors such as energy consumption
  • The governance factor ensures shareholder interests are protected at all times
  • The social factor ensures good relationships are maintained with local communities
  • ESG performance predicts customer loyalty. A study found that 88% of consumers are more loyal to an organisation that supports social and environmental issues
  • A strong ESG proposal helps organisations explore different markets and grow their presence in those markets
  • Delivering on and communicating ESG commitments: Every financial company would, at some point, need to showcase their ability to handle ESG-related risks and manage ESG opportunities.
  • Understanding materiality: It is impossible for even the best organisations to address all ESG concerns in one go. One way to ensure success is by assessing materiality, i.e., understanding the risks associated with incorporating ESG considerations and the challenges that are most relevant to the sector the company operates in and the overall functional context — geography and sector being the two most important criteria to assess in identifying possible material issues. Doing too little or waiting too long to address the most material ESG concerns could result in a company finding it difficult to catch up with peers, challenging investments over time.
  • Combating climate change: This requires reshaping aspects of society to enhance its resilience, as weather events such as storms, heavy rainfall and droughts damage agricultural land and production facilities, interrupt business processes and reduce value of commercial and residential property.
  • Create an integrated framework
  • Opt for a solutions-driven approach

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Acuity Knowledge Partners

Acuity Knowledge Partners

We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/