National Bank of Ukraine developed Project White Paper on Environmental, Social and Governance (ESG) Risk Management in the Financial Sector.
The document forms a vision of the future approach to the management of ESG risks in the banking system, with the aim of promoting sustainable development and minimizing their negative impact on financial stability, the market and the economy as a whole.
In the context of this document, ESG risks are considered as a potential source of financial or reputational losses that may arise due to the impact of environmental, social or managerial factors on the activities of financial institutions, their counterparties, investments or credit portfolios. The main focus is on preventing the negative consequences of such exposure.
The White Paper defines:
- prerequisites for the introduction of ESG risk management in the financial sphere, including risk assessment, the state of current regulation and the role of the NBU in this process;
- the main directions of the development of the regulatory framework, in particular the expected requirements for financial products, activities of institutions, corporate governance, information disclosure and risk assessment;
- a vision of the integration of ESG risks into the internal management and control systems of financial institutions, which includes impact assessment, the construction of data collection and processing procedures, as well as proper informing of market participants.
“In the future, assessment of the state of ESG risk management will become an integral element of the activity of financial institutions”, – said Kateryna Rozhkova, First Deputy Head of the NBU.
