Access to corporate credit also goes through ESG

post-author - Fri 27 May 2022 - esg , commercial credit , environment , social , governance , rating , sustainability

Energy saving, sustainability, and corporate welfare are now at the center of policy debates and business plans, and have also now become key factors, along with financial data, in order to evaluate a company.

We are talking about ESG or the acronym for Environmental , Social and Governance, a term coined in 2004 with the publication of the "Who cares win" report by the UN Global Compact Initiative.

Today, ESG is seen as the cornerstones of sustainable and responsible business investment, as well as crucial elements for companies seeking access credit.

ESG parameters do not replace the traditional rating but complement it, increasing the information available.

The evaluation criteria for the 3 parameters can be summarized as follows:

- FOR THE ENVIRONMENT: CO2 emissions, energy efficiency, efficiency use of natural resources, waste management, energy from renewable sources...

- FOR THE SOCIAL SPACE: stable employment, safety in the work environment, equal opportunity and corporate welfare, training, employee recognition etc.

- FOR GOVERNANCE: corporate structure and organization, management ethics and integrity, data protection, lack of evasive behavior in fiscal policies...

Specific KPIs (Key performance indicators) are calculated for each of the three factors, which calculate the performance of companies in each of the factors and their progress  being  then summarized in a rating.

ESG covers all companies from micro to macro, including SMEs.

The basic idea of ESG factors is to have a way of assessing the long-term viability of an undertaking. Companies that pursue concrete policies to improve ESG factors improve their reputation, which not only affects final consumer preferences, but also the cost of capital and credit.

One aspect to be considered is the close link between ESG and access to credit, in other words banks are invited to check that companies comply with the parameters, but at the same time they are urged to encourage the granting of credit for financial projects that pursue these values.