Author(s): Vania Krusteva / Language(s): Bulgarian
Publication Year: 0
Climate change has posed new challenges for central banks, regulators and supervisors. As a result, environmental, social and governance standards are becoming increasingly key to the reputation of banks. In the growing environment of challenges facing commercial banks – digitalisation, new competitors, variable interest rates, regulation and more – it is unacceptable to downplay environmental, social and governance (ESG) issues when it comes to the need for largescale transformation. Until recently, ESG departments existed as divisions that were not deeply connected to the bank's overall strategy, customer and product offerings, or incentive schemes. The reasons for embedding ESG standards and practices in all functions stem from a broader transformation project and to involve everyone from the senior executives (C-suite) to the local bank branch. ESG is a central driver for the radical, end-to-end transformation required of European banks and an important key challenge they need to address alongside credit, costs, consolidation and technology. ESG is positioned as the new litmus of good banking practice based on three converging trends. The first is climate change and the need to finance the decarbonisation of economic activities, which promises to open up new areas of activity for banks. The second is reputational, where banks and businesses that fail to meet their ESG commitments risk being accused of greenwashing. The third is regulation that will require banks to measure and disclose ESG risks in their loan portfolios and other banking activities, as well as the impact of their activities across a wider range of environmental, social and governance considerations. As a consequence of these reasons, ESG standards are expected to be crucial for the reputation of banks. In the coming years, banks that have a lead in this process will be more competitive and will gain reputational advantages over their competitors. Green (ESG) marketing and digital transformation are two important trends in the commercial banking sector that reflect the growing emphasis on sustainability, environmental responsibility and the adoption of digital technologies. Let's explore how these two aspects intersect: This article presents the reasons, nature, benefits and possible downsides of the impact of green marketing on financial institutions, as well as the importance of the digital transition and ESG standards for the well-being of the economy's foundational sector.
More...
