Successfully managing ESG credit risks

In the transformation towards a sustainable economy, credit institutions play a central role as a link to the economy. As a consequence, the requirements in ESG-relevant regulation in the banking sector are increasing. This is a major challenge for many banks. Why? Companies can hardly collect the necessary ESG data. Nevertheless, credit institutions have to make a risk assessment. This is exactly where imug rating comes in.

Alexander Thole

How does the collection of ESG risks in the credit portfolio succeed?

Our solutions address four key challenges that credit institutions face when surveying ESG risks in the loan portfolio:

  • Robust ESG data: Required data sets from SMEs are collected from publicly available sources, from the imug database and from the debtor themselves.
  • Assessment methodology: Each debtor is checked for ESG aspects and receives a quantitative indication for the assessment of associated risks.
  • Classification of the loan portfolio: For a targeted analysis, based on the bank’s risk management, the loan portfolio is classified according to institution-specific criteria.
  • End-to-end processes: The technical implementation takes place in an end-to-end process from data collection to the specific ESG score.

What are the advantages for credit institutions?

With imug rating’s solutions, credit institutions arm themselves for compliance with the already comprehensive and still increasing ESG regulations. The ESG risks in the credit portfolio are made transparent, quantifiable and comparable at individual customer level. This enables goal-oriented ESG management at both the bank-wide as well as business sector level. The product and service range too is evolving: Sales can target customers with the specific information and support them in their transformation to a sustainable business. Active and external communication of ESG activities increases credibility and reputation in market perception.

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