Sustainability and management of ESG risks?

Sustainability and ESG will accompany us in the coming years!

Climate change is increasingly becoming a focus of supervision and requires integration of climate and environmental- and ESG risks into risk management

European Central Bank
“Institutions are expected to properly document their assessments of climate-related and environmental risks in terms of their business environment [...] ECB expects institutions to consider climate-related and environmental risks – as drivers of existing categories of risk – when formulating and implementing their business strategy and governance and risk management frameworks. It further explains how the ECB expects institutions to become more transparent by enhancing their climate-related and environmental disclosures.”

European Banking Authority
“ESG risks to institutions are defined as risks that stem from the current or prospective impacts of ESG factors on their counterparties or invested assets, i.e. the risks arising from the core activities of institutions. ESG risks materialise through the traditional categories of financial risks (credit risk, market risk, operational and reputational risks, liquidity and funding risks) [...] The EBA sees a need to enhance, in a risk-based and proportionate manner, the incorporation of ESG risks into institutions’ business strategies, internal governance arrangements and risk management frameworks.”

European Systemic Risk Board
“To quantify the significance of these risks, policymakers could seek enhanced disclosure of the carbon intensity of non-financial firms. The associated burdens on financial firms could then be stress tested under the negative scenario of a late and sudden transition.”

Tackle the supervisory challenges!

PwC can help you gain a quick and systematic overview of your bank‘s level of preparedness regarding the extensive requirements and regulator´s expectations on climate and environmental or ESG-risks and we can help you to implement ESG risk management.

• PwC ECB requirements gapping: PwC can help you assess the gaps in your processes and documentation in relation to ECB requirements, enabling you to identify areas for improvement.
• PwC Road-Maps: PwC has created holistic implementation plans for the implementation of sustainability considerations for various customers.
• PwC Heatmap: PwC has developed Heatmaps e.g. based on Sustainable development goals for defining and analysing ESG-risk drivers. Heatmaps are used for example as part of materiality assessment.
• PwC Stress Test: We have already supported banks with the ECB climate stress test. In addition, we supported various banks in the development of internal climate stress tests and used climate risk stress testing tools. As part of our projects, we have dealt in particular with the Network of Central Banks and Supervisors for Greening the Financial System (NGFS ) and other data sources, e.g. for physical risks.
• PwC ESG Score: PwC develops ESG scores for a banking association and banks. We designed hybrid scorecard by using both external and internal available information. Our ESG scores identify relevant risk factors and are used in addition to evaluating individual loans, e.g. for portfolio analyses, risk appetite statements, strategy and risk management.
• PwC ESG-Data Tracker: We as PwC are able to help you to identify new data points and for displaying missing data including analysis of required data for the disclosure of ESG risks and efficient identification of the need for action and tracking of project progress and optimizing your disclosure requirements.
• PwC benchmarks: We draw our extensive experience from numerous projects in the context of ECB banking supervision, the ongoing analysis of regulator´s climate risk letters (e.g., ECB, EBA, ESMA), results of on-site inspections and other ECB pronouncements and, last but not least, from our direct communication with the ECB. This experience helps us to identify supervisory trends at an early stage and, in particular, to read "between the lines" of published supervisory requirements.