GIZ India has developed and launched a toolkit for Banks / Financial Institutions (FIs) to enable them identify and assess potential Environment, Social and Governance (ESG) risks and opportunities in their investments. The Toolkit is an Excel based, easy to use and enables the banks and financial institutions to quickly identify and assess potential ESG risks, as well as opportunities to add value to their portfolio companies.
Environmental, social and governance factors can pose serious risks and have impact on the long-term risk and return profile of investments – a fact that fund managers are increasingly aware of. As a result, it has become common practice to include an ESG focus in investment proposals, decisions and strategy within the mainstream investment community. Integration of ESG dimensions in banks’ credit assessment systems can help de-risk their loan portfolios. A greater focus by banks will also influence businesses and communities to take serious cognizance of the ESG factors impacting them.
In order to make the toolkit more inclusive, experts were commissioned by the project to develop an ESG Assessment system filling the gaps perceived by potential users. The resultant framework is guided by an easy to use excel based Toolkit with explanations/references for the easy understanding of banking analysts who are not expected to be ESG experts.
The ESG toolkit has been designed under the ambit of Indo-German bilateral project Responsible Enterprise Finance (REF). Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) is supporting the partners in implementing the programme. The overall objective of the REF project is to increase the supply of loans and risk capital for sustainability oriented investments made by Small and Medium enterprise (SMEs) and hence place these SMEs on a sustainable growth path.