
The future of ESG
in banking
Get the lowdown on ESG in the banking industry, including the future of ESG and banks.
Importance of ESG in banking today
Environmental, Social and Governance (ESG) principles are becoming increasingly important in banking. This is due to a number of factors, including:
1. Government regulation and investor pressure
Governments around the world are enacting regulations that require banks to disclose their ESG performance and to take ESG considerations into account when making lending and investment decisions. Investors are also increasingly interested in companies with strong ESG practices.
2, Rising customer expectations
Customers are becoming more aware of ESG issues and are demanding that the companies they do business with operate in a sustainable and responsible manner. This is leading banks to develop new products and services that are aligned with ESG principles.
4. The opportunity to differentiate
Banks that can demonstrate strong ESG practices can gain a competitive advantage. This is because they are more likely to attract and retain customers, as well as secure favourable investments from institutional investors.
5. The potential to generate new revenue streams
ESG investing is a growing market, and banks that are well-positioned to service this market can generate new revenue streams.
3. The need to manage risk
ESG risks can have a significant impact on a bank's financial performance. For example, climate change can lead to increased physical risks, such as extreme weather events, and transition risks, such as changes in regulatory and market conditions. Banks that effectively manage ESG risks are better positioned to protect their balance sheets and maintain their profitability.
ESG and banking performance: 5 benefits
Prioritising ESG can actually have a positive impact on bank performance:
1. Improved customer trust and loyalty
Banks that prioritise ESG initiatives can enhance their reputation and attract customers who value sustainability and ethical business practices. This strengthens customer loyalty and fosters positive brand perception.
2. Reduced risk exposure
By proactively addressing ESG risks, banks can mitigate potential financial losses and protect their long-term profitability.
4. New revenue opportunities
ESG-aligned products and services, such as green loans and sustainable investments, can open up new revenue streams and attract environmentally conscious customers.
5. Talent attraction
Moreover, ESG-committed companies often have a more positive work environment, attracting and retaining top talent, further enhancing their performance.
3. Enhanced operational efficiency
ESG initiatives can lead to improved resource management, reduced waste, and increased energy efficiency, boosting operational efficiency and cost savings.
ESG reporting in banking
The EU is taking a leading role in promoting ESG reporting, and there are a number of important developments to note.
The EU has adopted two key pieces of legislation that are relevant to ESG reporting in banking:
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Corporate Sustainability Reporting Directive (CSRD): The CSRD requires large companies to disclose their ESG performance in a standardised format. The CSRD applies to banks with more than 250 employees and a balance sheet total of more than €43 million.
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European Sustainability Reporting Standards (ESRS): The ESRS are a set of guidelines for ESG reporting that are being developed by the European Financial Reporting Advisory Group (EFRAG). The ESRS are expected to be mandatory for banks from 2028.


The CSRD and ESRS are having a significant impact on the way that banks are reporting their ESG performance. Banks are now required to provide more detailed information about their ESG activities, and they are also being held to account for their ESG performance by investors and other stakeholders.
Impact on banks
Top 10 ESG banks
According to the Sustainable Banking Revenues Ranking, which examines how much of a bank’s overall revenue is being generated from sustainable lending, investments and underwriting, the top 10 ESG banks in 2023 were:
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Vancity (Canada)
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Procredit Holding (Germany)
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Triodos Bank (Netherlands)
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Amalgamated Bank (US)
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Turkiye Sinai Kalkinma Bankasi (Turkey)
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The City Bank (Bangladesh)
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Banco Pichincha (Ecuador)
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SpareBank 1 Østlandet (Norway)
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UOB (Singapore)
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Nykredit (Denmark)

Future of ESG in banking
It is highly likely that ESG will continue to grow in terms of importance for banks in the future. Banks that can effectively integrate ESG into their operations are well-positioned to benefit from the growth of the sustainable finance market and to build a strong reputation for sustainability.
Specific examples of what the future might look like:
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Banks will continue to develop new green lending products and services: These products will help businesses and individuals to finance their sustainable projects.
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Banks will invest more heavily in sustainable infrastructure: This will help to reduce the carbon footprint of the financial system.
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Banks will collaborate with other stakeholders to address ESG challenges: This could include working with governments, businesses, and NGOs to develop new solutions to climate change and other ESG issues.
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Banks will use technology to manage ESG risks more effectively: This could include using data analytics to identify and assess ESG risks, and using blockchain to track ESG performance.
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Banks will embed ESG principles into corporate culture: This will ensure that ESG is considered in all aspects of the business, from lending decisions to employee training.