Sustainability for Financial Institutions and Sustainable Finance

Financial institutions are critical players in the transition to a carbon-neutral economy and, because of their role in allocating capital, they have the potential to act as catalysts in achieving better environmental, social and governance (ESG) outcomes in society generally. Sustainability is relevant to every aspect of a financial institution's business, for example, their prudential resilience in the wake of climate change, to how they are run; with the requirement for appropriate corporate governance, well-designed policies and procedures, accompanied by compliant reporting and disclosure.

Sustainability considerations are now also at the forefront of services provided to customers and participation in financial markets generally. For well over a decade, the sustainable investment market has witnessed accelerated growth as global capital markets have quickly evolved to support companies’ growing desires to embed ESG considerations into their long-term strategies. Global funds and private equity are increasingly associating their investment strategies with sustainability classifications and targets while making public and pre-contractual disclosures around their approach to ESG, as lenders are exploring credible transition plans to help their borrowers move closer to net zero carbon emissions.

In doing so, litigation and enforcement are key risks faced by financial institutions, for example, over greenwashing allegations. It is vital then to understand how to mitigate and manage these risks together with the strategies available to bring disputes to a satisfactory conclusion, safeguarding brand and reputation. The need for quality transactional, advisory and disputes legal services to support your ESG journey has never been greater.

Our multidisciplinary global team works alongside clients to identify key risks, establish and evolve sustainable practices, make pivotal investments and comply with changing regulation – to set direction and navigate legal risk in the journey ahead, and support financial institutions and businesses to move forward, sustainably.

Our updated Sustainability Risk Radar covers trends, developments and associated risks relevant for financial institutions (FIs). Following our Sustainability Framework, we have identified the top risks that FIs need to consider along with the relevant services we can offer. This year's edition introduces a new component in the framework — Finance & Loans — which encompasses sustainability loans and sustainability linked-loans, transition finance, prudential rules and qualitative CRR disclosures, and bank climate transition plans.

Download our Sustainability Risk Radar to learn more.