InFocus: Commercial Banks & Capital Markets
MAY 6, 2021
- As the world starts to look to the future, regulators, oversight authorities, and policy makers are becoming more vocal about the need for greater business adoption of Environmental, Social and Governance (ESG) practices, especially in the Commercial Banks & Capital Markets industry.
- The industry must prioritize sustainable investment criteria, improve positive impacts, and mitigate negative ones through their lending products.
- The Commercial Banks & Capital Markets industry has a slightly larger share of Prime companies than the broader ISS ESG ratings universe. While the creditworthiness of a financial institution remains a key consideration for investors today, exposure to climate risk is playing an increasing role in these decisions.
- There is a growing perception that banks are not doing enough to avoid the unintended consequences of providing capital to entities that are contributing to the externalities caused by climate change.
- ISS ESG data shows that most of the Commercial Banks & Capital Markets industry obstructs the achievement of the SDGs. With a major focus still on environmental aspects, low-to-mediocre performance in the social aspects of the rating is dragging the industry’s overall results down.
- The demand for greater disclosure is being embraced as one of the many tools to support the development and execution of sustainable business practices. Capital will likely flow toward businesses that are supporting sustainable endeavors, while capital will be increasingly costly for those that do harm.
