ESG Survey on behalf of the Joint Research Centre of the European Commission |
Background and Context
Dear Madam, dear Sir,
So far, there are no widely accepted methodologies, overall scores, and metrics to assess banks' exposure to ESG factors. The existing tools, techniques, and methodologies used by practitioners to assess banks' environmental, social and governance (ESG) exposure vary in quality, relevance, and accuracy. In response to the need for a comprehensive ESG framework, the Joint Research Centre (JRC) of the European Commission together with European DataWarehouse (EDW) and the University of Cagliari participate in a joint research project on modeling the ESG exposure of European banks. By bridging the gap between the need for a targeted disclosure framework and a financial risk assessment, this research project aims to develop a first-generation matrix able to capture the overall sustainability performance of European banks. This analysis is also strongly linked to the assessment of ESG risks that banks are subject to, with clear implications from both a micro and a macro-prudential perspective.
The project aims to provide relevant scientific evidence in support to future policy work in the area of sustainable finance, with a focus on the banking sector. As the European Commission (EC) highlights in its renewed 'Strategy for Financing the Transition to a Sustainable Economy' launched on the 6th of July: improving the availability, comparability, and quality of ESG data will be essential to mainstream sustainability in the financial sector. Developing meaningful and comparable ESG metrics is even more of a challenge for banks, as particular materiality considerations should apply. In this context, disclosure obligations already exist under the Sustainable Finance Disclosure Regulation (SFDR) in relation to the adverse impact of investment decisions on people and the environment. Pillar 3 disclosures on ESG risks under the Capital Requirements Regulation (CRR) will also become mandatory as of next year. Finally, the Corporate Sustainability Reporting Directive (CSRD) will explicitly require larger companies, including banks, to report on both the "inside-out" and "outside-in" sustainability perspectives.
Against this background and with the cooperation of the EDW, the European Commission JRC would like to receive input from your institution by providing your views on the criticality of the ESG factors and whether these ESG factors are integrated in your entity's risk management framework. This input will be crucial to identify the key features that an ESG assessment model for banks should have, as well as to understand where the banking sector stands in this respect. To this aim, the European Commission JRC kindly invites you to answer our online survey.
Please note that information obtained through this exercise is intended for the sole purposes of this research project and will only be used by the European Commission JRC and the members of this project for the performance of its tasks and is not intended to be published. Only aggregate statistics could be included in the final report of the research project. The preliminary results of the survey were presented at the International Risk Management Conference hosted by the University of Cagliari and co-organized by the European Commission – JRC on 1-2 October, 2021.
So far, there are no widely accepted methodologies, overall scores, and metrics to assess banks' exposure to ESG factors. The existing tools, techniques, and methodologies used by practitioners to assess banks' environmental, social and governance (ESG) exposure vary in quality, relevance, and accuracy. In response to the need for a comprehensive ESG framework, the Joint Research Centre (JRC) of the European Commission together with European DataWarehouse (EDW) and the University of Cagliari participate in a joint research project on modeling the ESG exposure of European banks. By bridging the gap between the need for a targeted disclosure framework and a financial risk assessment, this research project aims to develop a first-generation matrix able to capture the overall sustainability performance of European banks. This analysis is also strongly linked to the assessment of ESG risks that banks are subject to, with clear implications from both a micro and a macro-prudential perspective.
The project aims to provide relevant scientific evidence in support to future policy work in the area of sustainable finance, with a focus on the banking sector. As the European Commission (EC) highlights in its renewed 'Strategy for Financing the Transition to a Sustainable Economy' launched on the 6th of July: improving the availability, comparability, and quality of ESG data will be essential to mainstream sustainability in the financial sector. Developing meaningful and comparable ESG metrics is even more of a challenge for banks, as particular materiality considerations should apply. In this context, disclosure obligations already exist under the Sustainable Finance Disclosure Regulation (SFDR) in relation to the adverse impact of investment decisions on people and the environment. Pillar 3 disclosures on ESG risks under the Capital Requirements Regulation (CRR) will also become mandatory as of next year. Finally, the Corporate Sustainability Reporting Directive (CSRD) will explicitly require larger companies, including banks, to report on both the "inside-out" and "outside-in" sustainability perspectives.
Against this background and with the cooperation of the EDW, the European Commission JRC would like to receive input from your institution by providing your views on the criticality of the ESG factors and whether these ESG factors are integrated in your entity's risk management framework. This input will be crucial to identify the key features that an ESG assessment model for banks should have, as well as to understand where the banking sector stands in this respect. To this aim, the European Commission JRC kindly invites you to answer our online survey.
Please note that information obtained through this exercise is intended for the sole purposes of this research project and will only be used by the European Commission JRC and the members of this project for the performance of its tasks and is not intended to be published. Only aggregate statistics could be included in the final report of the research project. The preliminary results of the survey were presented at the International Risk Management Conference hosted by the University of Cagliari and co-organized by the European Commission – JRC on 1-2 October, 2021.
For any enquiries regarding this survey, please contact EDW (ESG@eurodw.eu).
Yours faithfully,
Mikel LANDABASO ÁLVAREZ
Director for Growth and Innovation
Joint Research Centre of the European Commission
c.c.: Christian Thun, CEO, European DataWarehouse