🔎 What is ESG?
A framework to measure how companies/banks impact the world:
- E (Environmental): 🌳 Reduce carbon footprint, waste, energy use.
- S (Social): ❤️ Promote inclusion, healthcare, fair lending.
- G (Governance): 📜 Ethical practices, compliance, diverse leadership.
Examples:
- E → Solar energy projects ☀️
- S → Loans for rural schools 🏫
- G → Transparent board decisions 🏢
🏦 How Banks Use ESG (5 Key Practices)
- Create ESG Policies 📄 → Align with UN Principles for Responsible Banking.
- Assess Risks 🔍 → Climate risks (floods), social risks (unfair lending).
- Green Loans 💸 → Cheaper loans for eco-projects (e.g., solar farms).
- Report Progress 📊 → Use GRI/TCFD like a sustainability scorecard.
- Engage Stakeholders 🤝 → Tree planting, education programs.
📉 ESG in Lending: How It Works
- Check borrower’s ESG risks (e.g., pollution 🚯).
- Reward good ESG behavior → Lower interest rates 🌱.
- Monitor performance → Track carbon emissions yearly.
🌟 Top ESG Reporting Standards
| Standard | Focus |
|---|---|
| GRI | 📋 Full ESG report (E, S, G) |
| SASB | 🏭 Industry-specific metrics |
| TCFD | 🌡️ Climate risks (e.g., sea levels) |
| CDP | ☁️ Carbon emission tracking |
⏳ ESG Evolution Timeline
- 1960s–90s → Early eco & social movements (“Save the planet!”).
- 2000s → UN Global Compact 🌐 (companies pledge sustainability).
- 2010s → TCFD launched (climate risks mainstream).
- 2020s → ESG reporting becomes mandatory.
🇮🇳 India’s ESG Commitments
- Paris Agreement 🌍 → Cut emissions 33–35% by 2030 (per GDP).
- 40% electricity from renewables (solar, wind) by 2030.
- National Climate Plan → Green tech + energy efficiency.
✅ Quick Revision Keywords:
E = Carbon footprint 🌳 | S = Inclusion ❤️ | G = Ethics 📜 | GRI 📋 | SASB 🏭 | TCFD 🌡️ | CDP ☁️ | India → 33–35% cut + 40% renewables
📝 Quick Quiz
Which of the following is NOT an example of an environmentally sustainable banking practice?
a) Promoting renewable energy initiatives
b) Supporting green buildings
c) Offering loans without assessing environmental impact
d) Reducing energy consumption
Answer: c
What is the primary focus of “sustainable financing” in banking?
a) Increasing profits
b) Reducing employee benefits
c) Financing environmentally friendly projects
d) Eliminating risk assessments
Answer: c
Financial inclusion by banks can be achieved by:
a) Restricting access to loans for rural areas
b) Providing affordable housing loans
c) Reducing technology adoption in banking
d) Eliminating community outreach programs
Answer: b
Supporting education, healthcare, and affordable housing by banks falls under which ESG factor?
a) Environmental
b) Social
c) Governance
d) Financial
Answer: b
Good governance in ESG practices requires:
a) Overlooking risk management practices
b) Transparent and ethical operations
c) Prioritizing profits over compliance
d) Avoiding board diversity
Answer: b
What is the first step for a bank to integrate ESG into its lending practices?
a) Establish an ESG Lending Policy
b) Ignore ESG considerations
c) Reduce training for loan officers
d) Eliminate stakeholder engagement
Answer: a
ESG risk assessments for borrowers should include:
a) Ignoring their environmental impact
b) Evaluating labor standards and ethical conduct
c) Assessing only financial risks
d) Focusing solely on short-term gains
Answer: b) Evaluating labor standards and ethical conduct
Which ESG reporting framework emphasizes industry-specific standards?
a) GRI
b) SASB
c) TCFD
d) CDP
Answer: b) SASB
The TCFD framework is primarily focused on:
a) Social risks
b) Carbon neutrality
c) Climate-related financial risks
d) Employee benefits
Answer: c) Climate-related financial risks
What is India’s target for electricity generation capacity from non-fossil fuels by 2030?
a) 25%
b) 40%
c) 50%
d) 70%
Answer: b) 40%
The National Action Plan on Climate Change (NAPCC) includes initiatives for:
a) Fossil fuel investments
b) Sustainable agriculture
c) Reducing community outreach programs
d) Ignoring renewable energy adoption
Answer: b) Sustainable agriculture
In which decade did ESG integration become mainstream in investments?
a) 1960s
b) 1980s
c) 2010s
d) 2000s
Answer: c) 2010
The Principles for Responsible Investment (PRI) were introduced by:
a) The Paris Agreement
b) The United Nations
c) The Financial Stability Board
d) The Carbon Disclosure Project
Answer: b) The United Nations