ESG Risk Identification

From Open Risk Manual


ESG Risk Identification is the classification of assets according to their ESG characteristics[1]

This classification is pursued in order to support the identification of ESG Risks based on specific qualitative and quantitative indicators. This classification process allows the main potential drivers of ESG risks to be identified, which then justifies a more granular analysis on the most relevant categories of exposures (e.g. a given geography, sector), if needed.


It can be done, for example, through the categorisation of exposures (if applicable, combined) across asset classes, sectors, counterparties, geographies or on the basis of their length of maturity or position in the life cycle of the asset.

For instance, a geographic classification would help to identify the proportion of assets that are particularly vulnerable to the impact of physical risks in the form of higher sea levels, droughts or other climate-related hazards in given regions, while a sector classification could be used to enhance understanding of the share of exposures vulnerable to transition risks, for instance, in the form of regulatory changes and technological progress affecting those specific sectors.


  1. EBA Report: On Management and Supervision of ESG Risks for Credit Instituions and Investment Firms, EBA/REP/2021/18