Through the financial evaluation of parameters which represent the sustainability of the company together with the ethical understanding on how to implement these indicators, an ethical credit rating can be build to share the good governance of the bank with its clients and suppliers. This system will help companies and the investment community to evaluate how sustainability practices, and more inclusive stakeholder- oriented governance systems, could positively affect corporate performances
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Socio environmental risk managment
1. “If you think the economy is more important
than the environment, try holding your breath
while counting your money”.
Janez Potočnik
European Commissioner for Environment
ValuesSustain
c r e a t i n g m o r e v a l u e w i t h l e s s i m p a c t
Socio-environmental
risk management
2. we?
Benefits of
Who are
A Green Economy (GE) is growing if economic prosperity works
hand-in-hand with sustainability; investing in green sectors and by
greening brown sectors. The banking sector can play a vital role in
encouraging other industries to go green through promoting eco-
friendly financing schemes and providing incentives to those that
promote environmentally sound practices. Moreover, banks can also
increase green initiatives within their own operations by shrinking
their environmental footprint, controlling costs and establishing
recycling processes.
SustainValues (www.sustainvalues.net) implements projects
that green financial institutions through the use of
diagnostics and related environmental and social policy
tools, and the implementation of performance assessment
indicators and a credit rating system.
AIS (www.ais-int.com) is a multinational financial and
technological consultancy firm servicing the banking
sector. We specialise in (end to end) global credit risk
management, from the development of tailor-made
scoring and rating systems to the implementation of
integral risk models or complete Basel III projects.
Minimising environmental and social risk both the bank and the client
will reduce:
Financial risk of client inability to make repayments due to
environmental/social costs, as well as the loss of value of
collateral/assets as a result of contamination or non-compliance;
Legal risk about potential direct liability for bank (to pay for clean-up
of contamination caused by a customer) through control of client
company or possession of assets;
Reputational risk to damage reputation through association with
polluting, exploitative or 'unethical' customers.
green
banking?
green
banking
What is
3. become
green?
How to
This new metric enables banks to improve the evaluation of the profitability of green
enterprises in economic and financial terms. Through the financial evaluation of parameters
which represent the sustainability of the company, along with the ethical understanding on
how to implement these indicators, an ethical credit rating is created to share the good
governance of the bank with its clients and suppliers.
RiskManagement
Description
When management moves beyond a purely financial
framework, a Bank becomes an enactor of progress and
development of its business, aware of the growing
importance of Environmental, Social and corporate Governance (ESG). Their inclusion in the
bank's strategy as a major focus of development brings the opportunity of gradually
incorporating ESG into credit and investment decisions and process analysis.
Main activities
Strategic definition of portfolio upgrading (where do I want to go with this?).
Strategic ESG priorities definition (best in class).
Identification of normative and referral exclusion (exclusion list).
Definition of sectoral improvement for the green economy (thematic list).
Result
Identification and mapping of internal social and environmental risk through a risk matrix.
The matrix analysis:
Defines area of risk.
Identifies and prioritises areas / sectors of risk.
Implementation of selected principle/s of governance.
Implementation of upgrading priorities within the bank portfolio.
1 Portfolio Rating
Description
A sectoral rating, which includes ESG parameters, can be used to reduce the risk of the bank's
portfolio by helping to identify their "Best in Class" customers. Best in Class customers, those who best
manage the risks and opportunities associated with sustainability issues, will have a very good rating.
Main activities
Identification of main sustainability issues for each sector.
Analysis of the life cycle of the product / process in the sectors identified to calculate confidence
intervals within uncertainty of ESG impacts.
Definition of benchmarking parameters.
Result
Sectoral Risk evaluation, relative impacts and rating.
Socio-Environmental
2 Sectoral
Rating
4. implementation
tools
3 Enterprise / Individual Rating
Description
Development of the platform for collecting information and scoring called "Social and Environmental Credit
Rating" (SECR). SECR allows the calculation of ESG ratings for financial analysis and management. At any time
a customer manager will receive the financial and non-financial rating values and related tools for ESG risk
control for her/his customers.
Main activities
Definition of the tool for calculating financial and extra-financial rating.
Adaptation of the tool to bank ESG, credit risk and investment strategy.
Scoring formalization and traceability in respect to a reference note or a benchmark.
Guidelines for ESG risk management.
Guidelines for the process of extra-financial rating.
Staff procedural training and testing of the implementation system with:
1) Assessment of the objectives across multiple stakeholders.
2) Explanation of the guideline for credit analysts and managers.
SCACS Platform
SCACS integrates risk management for all business segments of the organisation into a single platform, from
individuals to large corporations, through intermediate segments such as the self-employed or small to medium
enterprises. This involves expediting all procedures for evaluation and formalization of credit operations,
incorporating a reliable automatic evaluation, which includes SECR results, and transforming a highly time and
resource consuming activity into an efficient and flexible management control system.
GMR
GMR is an engine component that facilitates the task of integrating a particular set of business rules in the
organisation's production systems. It allows not only the creation and modification of decision flows containing
models, decision matrices and rules, but also allows for the validation of their proper functioning. All this
minimizing the involvement of the IT department.
T.: +34 93 414 3534
marketing@ais-int.com
www.ais-int.com
T.: +34 693517644
info@sustainvalues.net
www.sustainvalues.net
ValuesSustain
c r e a t i n g m o r e v a l u e w i t h l e s s i m p a c t
ACROSS
ALL STEPS