Definition
ESG Risks are the risks of any negative financial impact on an institution stemming from the current or prospective impacts of ESG Factors on its counterparties or invested assets. The term is used in the context of Sustainable Finance.
Usage
In the context of formal ESG Risk Management, ESG Risks is the collection of risk types recognized with the articulation of ESG Criteria. ESG risks can vary by country or region, business line, economic sectors, client (market) characteristics, and other possible factors.
The ESG Classification is used extensively in the European Sustainability Reporting Standards.
ESG Risk Taxonomy
Issues and Challenges
- Lack of Uniform definition of ESG Risks
- Lack of Appropriate quantitative and qualitative criteria for the assessment of the impact of ESG Risks
