Smart About Risk  

Climate Change Risk, Green Finance and ESG Risks

ESG risks have the potential to significantly affect the operations of both financial and non-financial institutions, including the formulation of their strategies. The management of ESG risks is required both by public expectations and by the regulatory framework. Non-financial companies can expect, for example, changes in demand that will also affect their product mix, or impacts on production methods, supply chains, sales, logistics, marketing, PR or reputation.

ARM would like to offer you advisory and consulting services in the field of ESG risks and green finance. The benefits that cooperation with ARM in the area of ESG risk management brings to our clients include:

  • Integration of ESG into corporate strategy with a vision of benefit rather than only a threat
  • Minimization of implementation costs
  • Increased trust from investors, clients, and the public
  • Freeing up internal staff capacity
  • Clear and convincing external communication that meets regulatory expectations
  • Enhanced reputation among employees and increased attractiveness for potential job applicants

 

We offer all our clients:

  • ESG strategy development (including the formulation of practical steps):
    • definition of principles, objectives, related indicators and timelines,
    • integrating ESG into the corporate strategy, with a translation into:
      • product and service portfolio,
      • individual company activities (operations, production, logistics),
      • supply chains,
    • setting roles and responsibilities,
    • comparison with a specific company, industry or standards (benchmarking),
  • gap analysis to ensure compliance with international standards and/or EU regulations and expectations,
  • improving the quality of ESG data:
    • design/assessment of methodology for data collection, processing and evaluation,
    • definition and setting of data quality controls,
    • design/evaluation of the functional specification of IT systems for data collection, use and archiving,
    • workshops on data collection and processing,
  • Design of a practical methodology for ESG risk management, typically including:
    • ESG risk catalogue (definition of risks, assessment of their materiality),
    • ESG risk indicators (definition, calculation, limits and EWS),
    • design and calculation of stress scenarios / sensitivity analyses,
    • consideration of ESG risks in business continuity plans,
    • internal limits,
    • structure and content of internal reports,
  • setting up external reporting
  • consulting services in the field of green financing,
  • consulting services for obtaining an ESG rating.

 

To financial institutions, ARM also offers:

  • ESG risk consideration in ICAAP and risk appetite,
  • mapping of activities (or products and clients) according to the EU Taxonomy,
  • the impact of ESG risks on:
    • credit risk (e.g. in terms of PD change, LGD change, pricing),
    • market risk,
    • operational risk,
    • liquidity risk,
  • valuation of ESG financial instruments.
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