As part of the green transition, member banks of the Association are required to assess and report on their sustainability as well as on that of their clients and set targets for improvement. The Environmental, Social & Governance (ESG) Committee of the Association has evaluated the needs of banks arising from regulatory obligations to collect secondary ESG data for their clients (ie proxy data for information such as emissions, physical risks etc) as well as primary ESG data designed to assess the degree to which each client incorporates ESG criteria into their practices.
In order to perform this ESG assessment for their clients, member banks collaborated with Artemis Credit Bureau (a subsidiary of the Association), along with ICAP CRIF S.A., a member of the international CRIF S.p.A. Group, to establish an important infrastructure Project in the field of ESG, the Interbank Project for the assessment of businesses based on ESG criteria.
This Project was successfully launched in the first quarter of 2024, introducing to the Cypriot market an international, reliable tool for assessing the degree of compliance of companies regarding ESG criteria.
As part of the Project, customers of banks (legal entities) are invited to
complete a questionnaire through an international digital platform for ESG data collection and evaluation, named “Synesgy”. Since the Project is interbanking, companies which are common clients of different banks are asked to fill out a single questionnaire for all the banks. By completing the questionnaire, the company automatically receives:
– Its ESG Score.
– Its ESG Certificate, valid for one (1) year. The certificate can be published on the company’s website and shared with its customers, suppliers, and partners.
– A customized Action Plan with prioritized recommendations on how the company can improve its ESG performance.
The introduction of ESG Certificates for borrowers arises from the institutional role of banks in promoting sustainable growth. The information that is being collected from the questionnaires and the ESG Score of clients is being used by banks in relation to new regulatory requirements to determine, evaluate and monitor ESG risks in their lending portfolio. As far as companies are concerned, they may use their ESG Certificates for self-improvement, since together with the Certificate they will receive a tailor-made action plan with recommendations on improving their ESG Score and therefore their sustainability. The aim is for companies that have a high ESG score and consequently a lower exposure to environmental and other ESG risks and higher resilience in relation to the green transition, to have a financial benefit in receiving financial services. In addition, companies with a high ESG score will have a competitive advantage since their clients (other companies as well as consumers) are taking more and more into account their suppliers’ environmental footprint in their purchasing decisions.
