A regional bank generates added value in its day-to-day business by fulfilling its “ESG obligations”

A bank with many relatively small companies in its portfolio wanted to identify and analyze its corporate clients’ ESG risks using ESG scoring in order to meet new regulatory lending requirements. According to Simon Grimm, Expert Partner at zeb and specialist for ESG, risk management and regulation, an important prerequisite for the project was to turn this sense of duty into conviction: “Many banks initially fail to see the value-adding opportunities emerging from the requirements imposed by regulators and legislators. So, as in many previous projects, our goal was to find a way to fulfill these requirements that also benefits the bank.”

The project team came up with a color-coded traffic light system for classifying ESG risks. The different colors (red, amber and green) indicate how well a corporate client is prepared for risk scenarios in the three dimensions of ESG: Environmental, Social and Governance. This easy-to-understand system is based on a short list of targeted questions that the bank’s corporate client advisors can use to quickly obtain a qualitative picture of a company’s ESG risks and risk understanding. Larger companies need to answer over a dozen questions, while for smaller ones the list is shorter.

“In close collaboration with the client, zeb has developed a solution that takes the bank’s portfolio and risk potential into account. It keeps the associated processes lean and limits the required information to a minimum,” Grimm explains. “And it can be expanded if necessary.” He is convinced that zeb’s experts exactly understand both what their clients need and what the supervisory authorities demand in terms of sustainability and concludes: “In every project, we combine our technical, regulatory, business and process expertise to achieve the best possible results.”