In the financial sector, ESG requirements apply both due to legal regulations and due to the expectations of investors and market participants who focus on sustainability and responsible investing. For financial institutions, this means treating environmental, social and governance aspects not as separate topics, but as an integral part of financial management.
From a regulatory perspective, EU requirements form the central framework. The SFDR requires financial market participants to disclose how sustainability risks are taken into account and what adverse impacts investment decisions have. The EU Taxonomy defines which economic activities are considered environmentally sustainable and serves as a reference for products, portfolios and metrics. In addition, supervisory authorities, for example under the EBA Guidelines, expect ESG risks—especially climate risks—to be integrated into credit processes, risk management and governance structures.
In retail banking and client-facing business, ESG requirements are increasingly becoming relevant in substance for investments and financing for corporate clients. ESG factors such as emissions, resource use, working conditions, supply chain standards and governance structures are consistently incorporated into credit assessments and investment decisions. These developments make aspects of the sustainability strategy and sustainability reporting directly financially relevant, particularly through robust KPIs, consistent narratives and the principle of double materiality.
The requirements are particularly pronounced in the climate context. Financial institutions must assess and disclose physical and transition climate risks. This requires clear climate strategies, transparent emissions data and credible transition plans on the corporate side. This information influences lending terms, portfolio allocations and long-term risk assessments.
Social and supply-chain-related aspects are also becoming increasingly relevant. Requirements from supply chain due diligence as well as ESG risks in global value chains feed into ratings, engagement strategies and exclusion criteria. Overall, ESG requirements in the financial sector are evolving from pure disclosure obligations into a central management tool that significantly influences access to capital, financing costs and market opportunities.
