“All major Russian banks are integrating ESG analysis into their operations”

Photo by: Piter1977 / iStock

ESG banking used to be a separate area of focus for banks. Now the banking industry has come to realise how important the sustainability agenda is to the authorities, to product buyers and to society as a whole. That is why all major banks are integrating ESG analysis into their operations on an ongoing basis.

While there used to be teams that dealt exclusively with green loans and bonds, banks are now already integrating ESG scoring — assessing the significant environmental and social risks of every project they plan to finance — into their operations. If significant risks are identified, banks tend not to finance such projects.

In addition, ESG-scoring assesses the risks that the company may face in the long term. For example, the bank refuses to finance if the production facility is located in an area with high seismic activity or an increased likelihood of forest fires.

The scoring also takes into account industry trends. For example, if a borrower plans to build production facilities using outdated, “dirty” technology, after some time he will not be able to sell his products, so the bank will refuse to lend to him. To account for these risks, banks have introduced ESG project analysis into their core lending activities.

Cover photo: Sjo / iStock