Impact of climate-related risks on financial services

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Increasingly, integrating ESG activities into business-as-usual operations is not simply seen as the 'right thing to do', but also as a key factor in an organisation's sustainability, and ultimately, its success.

ESG considerations can be defined as follows:

  • Environment – the impact on the physical environment and resource consumption such as emissions, waste, and the use of energy or water;
  • Social – societal and community issues such as health and safety, labour rights, and diversity and inclusion; and
  • Governance – the overall management procedures and systems such as stewardship, accountability, and performance management.

ESG integration is how a corporate or financial firm incorporates, quantifies, and embeds these concepts into its own organisation and/or risk management processes.

ESG integrated investing is how a financial institution incorporates, quantifies, and embeds reported ESG data into its investment and capital allocation decisions.

ESG reporting is the communication of these activities through sustainability reports/metrics by corporates, and increasingly, by financial firms.

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