ESG has become a magic acronym, which denotes that Environmental, Social, and Governance aspects are key decision elements when a bank is confronted with a major credit or investment decision. Although ESG features are currently being introduced in every single sector of the economy, the significance of this term is still vague and quite poorly understood. In essence, it means that all economic, business, and investment decisions should take environmental, social, and governance factors into consideration to varying degrees.

ESG has become a magic acronym, which denotes that Environmental, Social, and Governance aspects are key decision elements when a bank is confronted with a major credit or investment decision. Although ESG features are currently being introduced in every single sector of the economy, the significance of this term is still vague and quite poorly understood. In essence, it means that all economic, business, and investment decisions should take environmental, social, and governance factors into consideration to varying degrees.

An important case is the field of loan approval decisions, where apart from the traditional credit analysis of the proposal done by the credit committee, a dedicated ESG committee within the bank will also apply its own criteria and decide whether the project respects and promotes environmental, social, and other relevant regulations.

In cases of companies or sectors with high environmental risks (ex. mining companies), additional information may be required, and the conventional credit criteria will not be sufficient. Such ESG considerations will apply to all three phases of credit procedures: preliminary screening and due diligence, credit approval, and post-loan management.
Incorporating environmental, social, and governance (ESG) factors into investment decisions can broaden investment opportunities, impact investors and society, and enhance investment performance.