ESG in regional banks

Decisive steps for a sustainable future

In a world characterized by rapid change, regional banks are facing a multitude of challenges. One of these challenges, which is increasing in importance, is the topic of sustainability or in other words ESG – Environmental, Social and Governance. In view of rising societal expectations and the growing awareness of sustainability, banks are now required to deal with these aspects more intensely than before and to initiate and implement appropriate measures.

Integrating sustainability into their strategy is a major step for regional banks to ensure long-term success. To this end, they need to develop clearly defined goals and strategies that incorporate environmental, social and governance-related aspects in decision-making processes.

Both in corporate and retail banking, sustainability criteria should be integrated into the business model using an opportunity-oriented approach. Regional banks have the chance to offer innovative financial solutions and at the same time exert a positive impact on society and the environment. This requires close cooperation with customers to understand their needs and sustainability goals and to offer appropriate products and services.

Effective risk management is essential to identify and assess potential sustainability risks. Regional banks need to adapt their risk management processes if they want to adequately consider and manage environmental and social risks.

Transparent reporting of sustainability information is turning from “desirable” to “mandatory” under the CSRD. Determining the carbon footprint of their own portfolio is particularly challenging for regional banks.

Clear and authentic communication is crucial for gaining stakeholder commitment to sustainable initiatives and for raising awareness of a bank’s sustainability efforts. Regional banks are well-advised to use their communication strategy for providing information about their sustainability goals, progress and successes and for promoting an open dialog with all stakeholders.

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