Leadership

The report emphasises that leadership is critical, both at the institutional and board levels, for a successful integration of ESG and sustainability practices within organisations. The report outlines that the integration of sustainability requires:

• An identification of risks and opportunities
• A set of clear policies, goals, targets, and guidelines
• Implementation of well-defined systems of governance, risk management, and training
• A system of monitoring, evaluation, and reporting for transparency and accountability.

Sustainability and risk

The integration of sustainability within banking operations requires a proactive approach to risk assessment, management, and reporting. Banks should consider the following to apply ESG provisions effectively:

• Assigning an ESG team for risk assessment and management
• Implementing a set of environmentally-friendly policies
• Setting a benchmark for environmental finances
• Establishing a system of ESG reporting, monitoring, evaluation, and disclosure.

Legal

Banking institutions face legal risks when they fail to conform to sustainable policies and practices. Therefore, Sustainability practices should be included and aligned with the banks’ legal and regulatory framework. The report highlights the following regarding legal and regulatory compliance:

• Collaborating with sustainability experts for legal support
• Adhering to national and transnational regulatory frameworks
• Adopting a set of stringent and well-defined policies within their legal framework.

Corporate and retail banking

Banks must adapt their corporate and retail banking sectors to little or no environmental footprints to meet the growing appetite for sustainable practices. Accordingly, banks should consider the following:

• Embedding ESG criteria throughout corporate banking and lending policies
• Restricting the financing and lending of projects and initiatives that harm the environment
• Setting a strict and well-defined ESG policy throughout their retail banking sector.

Communications and human resources

Banks require a communication and human resource policy to enhance their sustainability development. The report outlines the following:

• Setting comprehensive communication and marketing strategies for sustainability practices
• Providing ESG training and development to employees to build their knowledge and understandings of such practices
• Embedding sustainability in employee recruitment processes and existing performance management frameworks.

End notes

Banks internationally must put ESG at the core of their business to advance sustainable finance, according to the report. The report’s resource appendix offers a range of tools, forms, indices and disclosures to aid banks’ adaptation of ESG criteria. The report offers some evidence showing how banks benefit from sustainability:

• Study by UBS states that a sustainable investment strategy has achieved returns comparable to traditional investments.
• Corporate Knights data shows companies known for their good social or environmental record and management are outperforming their peers in the market.

The guide also outlines that Corporate Social Responsibility is increasingly becoming obligatory as regulatory compliance is strengthened by government bodies and international standards authorities.

In conclusion, to integrate sustainability principles into their operations, banking institutions worldwide must have leadership at both the institutional and board levels. They must identify risks and opportunities, set clear policies, guidelines, and meet national and transnational regulatory framework standards. Implementing proactive ESG strategies would result in comprehensive communication and marketing strategies, the provision of adequate ESG training and development for employees, the embedding of sustainability in recruitment processes, and existing performance management frameworks.