ESG & climate risk & resilience
WHY IS IT IMPORTANT FOR FINANCIAL INSTITUTIONS TO UNDERSTAND ESG, CLIMATE RISK, AND RESILIENCE?
RISK MANAGEMENT AND REGULATORY COMPLIANCE
Financial institutions are increasingly exposed to climate risks, including physical risks such as extreme weather events, and transition risks arising from policy changes, technological advances, and shifting market preferences. By integrating Environmental, Social, and Governance (ESG) factors into their risk management frameworks, institutions can better anticipate, mitigate, and adapt to these risks ensuring long-term stability and climate resilience.
With the evolving regulatory landscape demanding greater transparency in ESG practices, financial institutions need to comply with reporting requirements that disclose their ESG strategies and the climate impact of their investments. Failure to comply may lead to reputational damage, regulatory scrutiny, and financial penalties. Embedding ESG in financial decision making not only enhances compliance but also strengthens institutional credibility and supports the transition to a sustainable, low carbon economy.
REPUTATION ENHANCEMENT OF ORGANISATION CAN CREATE MORE ACCESS TO CAPITAL INFLOW AND MARKET OPPORTUNITIES
Investors are increasingly seeking out companies with strong ESG credentials, financial institutions that prioritise the ESG considerations can attract more capital, as both individual and institutional investors prefer to invest in organisations that align with their values regarding sustainability and social responsibility.
Institutions perceived as responsible and ethical are more likely to gain customer loyalty and trust, which is essential in a competitive market. Integrating ESG factors opens new market opportunities for the organisations, particularly in sustainable finance products such as green bonds and ESG-focused investment funds.
This not only helps meet the growing demand for sustainable investment options but also positions institutions as leaders in the evolving sustainable financial landscape.
MEETING CONSUMER EXPECTATIONS THROUGH OPERATIONAL EFFICIENCY AND MAINTAINING LONG-TERM SUSTAINABILITY
As consumers become increasingly environmentally conscious, they expect financial institutions to act responsibly regarding social and environmental issues. Meeting these expectations is essential for maintaining customer relationships and attracting a new client base.
Placing emphasis on ESG factors contributes to the overall sustainability of the financial system by encouraging responsible lending practices and investments that support the achievement of sustainable development goals. This approach aligns with global initiatives aimed at addressing climate change and social inequality.
The integration of ESG principles into the operations of financial institutions is no longer merely a trend but a necessity. It enables the management of risks, compliance with regulations, enhancement of reputation, access to capital, and the assurance of long-term sustainability in an increasingly complex global landscape.
What is ESG?
What is climate risk & resilience?
Climate risk refers to potential financial losses and operational disruptions financial institutions may face due to climate change. It includes physical risks from extreme weather events (like floods and wildfires) that damage assets and disrupt operations, and transition risks arising from policy, market, and technology shifts towards a low-carbon economy—potentially impacting investments in high-emission sectors.
Climate resilience is the ability of financial institutions to anticipate, manage, and recover from these risks. By integrating climate risk into decision-making, institutions can protect portfolios, meet regulatory expectations, and seize emerging opportunities in sustainable finance.
OUR AREAS OF WORK
ESG and climate risk audits and gap analysis
ESG and climate risk framework for disclosures and capital raising
ESG and climate risk governance structures
Financed emissions, Green Asset Ratios, and GHG accounting
Non-financial disclosures (IFRS S1 and S2)
FEATURED PROJECTS
Integrating ESG and climate considerations into institutional strategy and operations for a leading agri NBFC in India towards capital raise
Client/partner: Large national agri-NBFC and a European development agency
Year: 2023-24
Country: India
Description: Raised low-cost sustainable finance capital by strengthening ESG and climate risks assessments, improve brand visibility and create an inclusive, impactful, sustainable business model
Developed a comprehensive ESG and climate risk strategy for a leading agri-NBFC, aimed at raising capital by embedding sustainability across governance, operations, risk management and disclosures. This included a landscape assessment and benchmarking exercise, to devise a phased ESG/climate integration roadmap, and preparing disclosure guidance aligned with global standards such as TCFD, TNFD, BRSR, and IFRS S1/S2. The engagement covered preparing the institution for capital raise, capacity building for internal teams, strengthening the organisation’s sustainability communication approach, and developing the sustainability report to support transparency, resilience, and access to sustainable finance.
Institutional ESG diagnostic assessment and roadmap for a national development finance institution for capital raise
Client/partner: A national development bank and a regional multilateral development bank
Year: 2022
Country: Kazakhstan
Description: The project involved the evaluation of current practices across governance, strategy, risk management, and disclosure. Benchmarking against peer institutions and global best practices enabled the development of a gap dashboard and a phased ESG roadmap outlining short-, medium-, and long-term actions for institutional alignment and capacity strengthening, readying the institution for capital raise from MDBs.
Strengthening ESG & climate risk assessment and enabling greening of the Indian financial sector
Client/partner: A global policy thinks tank and a global climate NGO under a European government climate finance funding program
Year: 2021
Country: India
Description: Strengthened ESG and climate risk assessment and enable central bank supervision in the Indian financial sector through landscape assessment towards ESG and climate risk management, capacity building for 10 Indian financial institutions and policy options
Implemented a multi-institutional initiative to strengthen climate risk assessment and advance the greening of India’s financial sector. The engagement included a detailed landscape study of ESG and climate risk management practices across 10 of India’s largest public and private financial institutions, followed by development and delivery of an extensive capacity-building programme targeted towards credit and risk officers. The initiative also produced a policy options paper for the banking regulator, providing recommendations to integrate climate-related financial risks into supervisory and lending frameworks.