CLIMATE RELATED AND ENVIRONMENTAL RISKS - A financial service sector benchmark study - Capgemini
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G R E AT E X P E C TAT I O N S C L I M AT E R E L AT E D A N D E N V I R O N M E N TA L R I S K S A financial service sector benchmark study
G R E AT E X P EC TAT I O N S : C L I M AT E R E L AT E D A N D E N V I R O N M E N TA L R I S K S 2
FOREWORD
Climate change is here to stay. Global warming as well as changes to the overall
climate system have become topics that will remain with us well into the future.
The probability and frequency of serious consequences like extreme weather
events, heavy precipitation, tropical storms, and a rise in sea level will continually
increase, having potential impacts that include a reduction in global harvests and
a negative impact on global GDP. However, sustainability is not limited to climate
issues. Other environmental, social and governance aspects are also of critical
importance and can lead to further risks for society and the global economy.
Capgemini acknowledges the importance of sustainable business and an according
individual behavior. We strongly support sustainability both within our company as
well as with our clients’ transformations (see: CG Sustainability).
Climate-related and environmental (CR-E) risks continue to grow rapidly and
are already considered the greatest risks in the current global risk landscape
(see World Economic Forum’s Global Risk Landscape 2020). Management of these
risks is therefore essential in all industries, particularly for the financial industry.
But assessing these risks has its own challenges. On the one hand, they have to be
differentiated according to categories such as region, industry and supply chain
patterns. On the other hand, their impact is permanently changing, irregular and
can occur very seldomly while data histories are often missing. These complicate
the collection of data and the meaningful analysis of risk patterns. To manage
CR-E risks, institutions need to analyse these risks across all risk types and integrate
them into their risk management framework. In addition to this, authorities also
recommend that these risks be integrated into stress tests and long-term
scenario analysis.
Increasing public scrutiny with regard to sustainability aspects and risks together
with higher transparency – enabled also by growing disclosure requirements –
is causing additional pressure on the management of the institution’s own CR-E
risks. Furthermore, the regulatory environment is rapidly evolving, fueled by the
European climate and energy targets. Current discussions on CR-E risks go so far
as to consider extending the usual outside-in view to include an insight-out view,
which would reflect the institution’s potential impact on environment and society.
Our study aims to give orientation about the current status of how banks
are adapting with regard to climate and environmental risks and thus
support our clients to set priorities on their transformation paths in this
fast-changing and challenging environment.
Joachim von Puttkamer
Global Head of Banking,
Head of Financial Services DACH
3
AGENDA
FOREWORD 3
SURVEY APPROACH AND
MANAGEMENT SUMMARY 5
I N T R O D U C T I O N R E G U L ATO R Y
BACKGROUND 6
S T R AT E G Y – I M PA C T O N B U S I N E S S 8
GOVERNANCE & RISK 10
D ATA & R E P O R T I N G 12
SUMMARY AND DISCUSSION 14
A U T H O R & CO N TA C T S 16
4
SURVEY APPROACH AND
MANAGEMENT SUMMARY
The objective of this study is to provide a snapshot Participants operate as universal banks, direct banks,
of the as-is maturity level within financial institutions and cooperative banks as well as special financial service
with regards to the thirteen expectations delineated in providers. The participants are located across Austria,
the “Guide on climate-related and environmental risks” Germany, the Netherlands, and Switzerland. Considering
(CR-E risks) by the ECB1. For this purpose, a questionnaire that the financial service sector acts as a multiplier in the
was developed with more than 30 questions, including economy and that the combined balance sheet size of
qualitative statements, split into three main categories: the participating financial institutions is more than EUR
(1) Strategy, (2) Governance & Risk, and (3) Data & 5 trillion, the impact of the participants in the economy
Reporting. is deemed as broad.
Key findings of this study are:
Maturity of the More than half of Overall governance Data and ratings are an
approach towards the institutions see structures for CR-E risks essential component
the inclusion of their business models are heterogenous and of understanding and
sustainability differs at least moderately not well developed. managing CR-E risks,
between the four and 38% extremely Only 50% of participants and the lack of both
countries. The affected by CR-E implement measure to availability and quality
Netherlands are ahead risks. Simultaneously, manage CR-E risks but represents one of the
in this regard. ESG- institutions recognize the execution of these main pain points of the
related topics are that by positioning measures is governed participants. Efforts to
already deep in the themselves as pioneers by different bodies in obtain any of both are
strategy, governance internally and externally different institutes and plagued with high costs
and subsequently in the they can send a is sparsely tracked. The and low comparability.
whole organizational powerful signal to the sole exception being the Particularly institutions
structure. Global or at market participants and inclusion of CR-E risks operating globally see
least EU-wide standards drive an economy-wide into the risk culture by reliable and comparable
and regulations could realignment on more 78% of participants. sources of data as
foster the efforts for than just core industries. Furthermore, necessary to rate
other countries as well. institutions struggle products, financing, and
to allocate CR-E risks other offered services
to one specific risk along the value chain
category. They are seen of financial institutions
as a facet to all – credit, constantly and
market, operational and transparently.
liquidity – risks.
A brief overview of the regulatory background and activities contextualizes relevance of the findings which are provided
subsequently and are structured around the three topics of Strategy, Risk & Governance, and Data & Reporting.
1
See ECB (2020) Guide on climate-related and environmental risks
5
G R E AT E X P EC TAT I O N S : C L I M AT E R E L AT E D A N D E N V I R O N M E N TA L R I S K S
R EG U L ATO RY B AC KG R O U N D
Climate change is one of the The economy must react to the three focus topics in their audit
most important topics in the existing and upcoming challenges. in 20203. By the end of 2020 the
world right now. Instead of being ECB published the final version
just a temporary occurrence, Global regulators also have of its guide on climate-related
sustainability will be permanently high expectations for market and environmental (CR-E) risks4.
on the agenda. Larry Fink, participants. These expectations The EBA added climate related
Chairman and C.E.O of Blackrock, should drive the change towards risks to their stress test for 20225.
reinforced his powerful message a greener economy. Particularly, Taking these developments into
from last year with this year’s letter banks have a multiplicator effect account, the extent to which
to the world’s C.E.O.s. Climate on the markets. Local regulators, financial service sector practices
change will be “a defining factor in for example the BaFin, added of European institutions are in
companies’ long-term prospects”2. sustainability as one of the line with regulatory expectations
Figure 1 | Cumulative number of publications* (part one)
25
∑ ~ 10 ∑ ~ 25 18
14
|10 5
Q4 Q1 Q2 Q3 Q4
2019 2020
12/2019 02/2020 06/2020 10/2020
EC EC EU EBA
The European Summary Report Taxonomy Discussion paper
Green Deal of the Public Regulation on management
Consultation and supervision of
on the Review ESG risks for credit
of the NFRD institutions and
12/2019 investment firms
EBA
Action plan on
sustainable
finance
01/2020 04/2020 09/2020 11/2020
EBA ESMA, EBA EBA ECB
Sustainable Finance & EIOPA Survey: Pillar 3 Guide on
11/2019 Market Practices Joint Consultation disclosures on climate-related
EC Paper: ESG disclosures ESG risks and environmental
risks Supervisory
Regulations on sustainability
expectations relating
related disclosures in the
to risk management
financial services sector
*Amount is not exhaustive Publications in effect and disclosure
2
See Larry Fink's 2021 letter to CEOs, (accessed 22 Feb 2021), bit.ly/Larry _Fink_CEO_Letter
3
See BaFin supervisory priorities for 2020, (accessed 22 Feb 2021), bit.ly/BaFin_supervisory _priorities_2020
3
ibid.
4
See ECB (2020) Guide on climate-related and environmental risks
6
set by the authorities is one of sustainability have been increasing (RTS) and will specify certain
today’s most relevant topics for over the past years visible in Figure 1. aspects in this regard. The time
the financial services sector. As the number of regulatory papers is now for financial services
has already increased from 10 in participants to take measures
Although the ECB expectations 2019 to roughly 25 in 2020, it is and incorporate CR-E risks and
and other proposed regulatory likely to reach the figure of 35 or other facets of sustainability
changes have not yet become more in 2021. The status of many in their implementation and
formally binding, they are expected of these publications is set to change plans.
to become relevant in the near change in the coming year, e.g. the
future. Additionally, they are EU Taxonomy6, which was published
part of the SREP considerations. in 2020, will trigger a large amount
The publications that deal with of regulatory technical standards
Figure 1 | Cumulative number of publications* (part two)
35
25
∑ ~ 35 18
10
Q1 Q2 Q3 Q4 Q1
2021 2022
01/2021 Q1/2021 Q1/2021
EC EBA EC
Study on Final Draft on Draft Publication
sustainability- management of the NFRD
related ratings, and supervision
data and research of ESG risks for
credit institutions
and investment
firms
Q1/2022
EU
Application of
the requirements
02/2021 Q1/2021 for climate-related
ESMA, EBA EBA objectives by the
EU Taxonomy
& EIOPA Final Draft on the
Final Draft on Pillar 3 disclosures
ESG Disclosures on ESG risks
Upcoming publication *Amount is not exhaustive
6
For more details see Sustainable finance taxonomy – Regulation (EU) 2020/852.
7G R E AT E X P EC TAT I O N S : C L I M AT E R E L AT E D A N D E N V I R O N M E N TA L R I S K S
S T R AT EG Y – I M PAC T O N B U S I N E S S
CR-E risks affect the entire Figure 2 | How severely do CR-E risks affect Figure 3 | Have you adapted your business
the business model of your institution? strategy based on CR-E risks?
organization. Therefore, it is
important to create and promote
Not at all 11 %
appropriate strategies on top
Slightly 17 %
management level. Consequently,
the first part of the interview was Moderately 22 %
dedicated to Strategy aims to Severely 11 %
provide insights on the awareness Extremely 39 %
regarding CR-E risks at the 44 %
supervisory and management 56 %
board level of financial institutions. Second, bank management also
This topic is particularly relevant sees that sustainability offers them
for these key individuals because it an opportunity to exploit new
affects their organisation’s business market opportunities.
strategy in the short, medium and
long term7. This survey segment is One such opportunity is the
comprised of five questions that growing demand for products No Yes
focus on the impact CR-E risks with a green profile. Organisations
have on a bank’s business model. are facing greater societal pressure
These questions also explore if as demand from institutional Thus, an evolved public image is
CR-E risks foster change of a bank’s clients for sustainable investments necessary to thrive within this new
business strategy and provide continues to grow. Additionally, market environment. For instance,
insight on the main drivers behind there is an increasing expectation banks are publicly announcing
such change. Also included are the from retail clients for organisations sustainability strategies with clear
area’s most substantially affected to improve their Environmental, commitments to limit or prohibit
by CR-E risks. If CR-E risks related Social and corporate Governance their investments in specific
initiatives were underway at the (ESG) profiles. economic sectors, such as tobacco,
participant’s institutions, projects the arms industry, and oil and gas.
were identified. Some institutions have even
"First time since announced their divestments
More than 70% of respondents financial crisis that a of portfolio in these industries.
see their firms’ business models
topic offers potential
at least moderately affected by "A low CO2 footprint
CR-E risks (Figure 2). In fact, for positive impact
56% of interviewees stated that as a bank is nice to
their firms adapted their business and reputation".
strategies to account for the
have but the real
increasing influence of these risks This growing demand for green impact comes with
(Figure 3). The rationale behind
this development is two-fold.
products goes hand in hand
with increased retail customer
a green portfolio".
First, related regulatory obligations identification with banks
are becoming more demanding and By these actions banks seek a new
demonstrating ESG values. Banks level of client identification with
bank management expects further can capitalise on this by choosing
extensions of these regulatory their overall business strategy,
to pioneer business strategies that known previously only from
obligations. focus on sustainability and foster packaged goods and fashion
ESG values. industry8.
7
See European Central Bank, (2020), Guide on climate-related and environmental risk.
See Business Insider (2020), Sustainability sells: Why consumers and clothing brands alike are turning to sustainability as a guiding light, (accessed 22 Feb 2021)
8
bit.ly/Sustainability _sells
8Deutsche Bank, for instance, Figure 5 | Do you have ongoing projects in
the planning stages to prepare for expected
set out ambitious goals in its supervisory requirements?
2020 “Climate Statement” to
achieve a portfolio of sustainable
investments under management 11 %
of over EUR 200 billion by 2025, 17 %
to exit from coal mining industry
by 2025 and to prohibit new oil
and gas project financing for
specific regions9.
Overall, banks recognise that
they are driving an industry-wide
realignment due to the significant
impact of CR-E risks on most
business areas. The regulatory 72 %
consideration of CR-E risk has
a significant impact on three No
core industries (Figure 4), as Yes, already for 2020
Yes, in planning for 2021
large amounts of greenhouse
gas can be saved in these
indispensable industries. Other banks have developed
sustainability strategies constantly
Figure 4 | In which area or areas do you see over the past years and created
the most substantial effects? general bank-wide target operating
models (TOM) focused on
sustainability. The other end of the
spectrum is represented by banks
that have only recently initiated
such changes, figuratively missing
Real Food & Energy their jump onto the regulatory
estate agriculture requirement train at an early stage.
Now time is limited to implement
It is therefore not surprising all requirements.
that 72% of financial institutions
responded they have actively Both, an appropriate governance
addressed expected regulatory structure and an adequate risk
requirements in projects in 2020 management framework, are
(Figure 5). Furthermore, 11% are crucial prerequisites for any
planning to continue their efforts organisation expecting to thrive in
in 2021. In general, this peer group this changing market, in addition to
is widely spread with respect to the the regulatory induced challenges.
timeline with which sustainability
projects are being implemented.
A salient example is an ongoing
project to fulfil aims related to
sustainability that originated
in 2015.
9
See Deutsche Bank, (2020), Climate Statement
9G R E AT E X P EC TAT I O N S : C L I M AT E R E L AT E D A N D E N V I R O N M E N TA L R I S K S
GOVERNANCE & RISK
An adequate set up of governance Of those institutes that have The second category reflects the
and risk management structures explicit measures, 33% state that self-commitment to, for example,
in an organization is crucial these are not positioned in any reduce the institution’s carbon
to successfully reflect the committees or panels while 22% footprint, in some cases to the
adaptations needed to succeed in indicate to have created a new point of carbon neutrality. As
a changing regulatory and business committee or panel dedicated mentioned in the section above,
environment. Ten questions of the exclusively to the governance of the general sentiment is that real
questionnaire were dedicated to these measures (Figure 7). The economic and social impact will
assessing the current penetration remaining 45% have modified or primarily be achieved with a green
of CR-E risks into these structures. extended the mandates of existing portfolio, and thus the KPIs should
The questions were concerned with bodies to manage CR-E risks. reflect this ambition. Nonetheless,
if and how measures to manage as discussed below, internal
these risks had already been Figure 7 | Are these measures already changes can be leveraged as a
implemented, if key performance implemented in committees and/or panels? signal to other market participants.
indicators (KPIs) and key risk
indicators (KRIs) were in place, Participants were also queried
their inclusion into the risk culture on whether they had already
and the consideration of CR-E 22 % developed KRIs to manage and
risks into the risk appetite. This measure CR-E risks. To account for
33 %
part of the survey concluded with the known paucity of data available,
questions regarding in which qualitative and quantitative KRIs
risk categories CR-E risks are were differentiated. 72% of the
considered and if they are interviewed institutes stated to
part of any stress scenarios. have no KRIs at all, while only 6%
answered that they have both
The results show that 50% of quantitative and qualitative KRIs.
the interviewed institutions have 45 %
implemented measures to manage
CR-E risks in their governance "You have to put
(Figure 6); an example given by a No Yes, existing committees
Yes, new committee
your house in order
respondent is the implementation
of institution-wide Sustainable to have meaningful
Finance Regulations (SFR). Dedicated bodies for the conversations with
management of CR-E risk promote
Figure 6 | Have you already implemented an executable decision-making the client".
measures to manage CR-E risks in your process and the enforcement of
governance?
discipline. In both cases adequate The remaining 22% are evenly
monitoring and the subsequent split among those with only
informed decision-taking can only qualitative or only quantitative
take place if any measures are KRIs. Seeing as more than two
reflected in appropriate KPIs. As is, thirds of respondents have not yet
half of the interviewed institutes implemented any KRIs, it is then
responded that they have KPIs in not surprising that only 33% of the
place, and these can be roughly interviewees declared that CR-E
50 % 50 % divided in two categories. The first risks are part of their risk appetite,
category is comprised of those although some of the remaining
KPIs that follow the evolution 67% added that the risk appetite
of the portfolio by reflecting statement (RAS) is currently
the substitution away from non- being amended accordingly.
desirable industries (such as tobacco Top management defines the
gambling, and coal mining) into roles and responsibilities across
No Yes
others perceived to be more the organization, and in the case
sustainable. of risk, usually based on the
10Three Lines of Defence (3 LoD) Figure 9 | Which types of risk do you consider are considered in all other risk
when assessing CR-E risks?
model. Almost every participant categories as well, albeit not in the
already applies this model in same magnitude. As stated by one
100,0 %
its organization. For 44% of participant, CR-E risks should not
interviewed institutes internal 81,3 % be perceived as a new risk type,
Percentage of respondent
audit, as the 3rd LoD, considers 68,8 % but rather as a different aspect
aspects of CR-E risks in their annual within each risk category and as
50,0 %
process. One third of the remaining such, should be considered equally
56% responded that such a in all categories to capitalize on
development is planned in 2021. existing processes.
The participants seem to agree that One of the expectations that
an internal evolution is a germane Credit Operational Market Liquid was expanded upon during the
risk risk risk risk
part of creating a trustworthy and consultative process prior to the
plausible position in the market. publication of the final guide
As succinctly stated during the A different study by Capgemini concerns stress scenarios.
interviews by a participant: “You Invent also showcased the This expansion confirms the
have to put your house in order relevance of the “ecological importance attached to stress
to have meaningful conversations footprint” of business, for clients scenarios not only be the regulator
with the client”. as well as for staff10. but by the market. When asked if
CR-E risks were already included
Figure 8 | Do you consider CR-E in your As for the question in which into such scenarios, only 39% of
risk culture? risk categories CR-E risks are participants (Figure 10) answered
considered, there are two aspects in the affirmative. This relatively
that can be highlighted. low number given the importance
attached to this exercise, is,
according to the participants,
22 %
"Sustainability is due to the large data requirements
rather a facet to associated with such a test and the
current low data availability and
every risk type quality.
instead of a new
Figure 10 | Have you incorporated CR-E into
risk type". specific stress scenarios yet?
78 %
First, the EBA suggests11 to
consider any risk associated with
ESG factors on the conditions of
No Yes borrowers and all participants do
so by accounting for CR-E risks as 39 %
One way of doing is so is to foster being part of credit risk. Second,
a coherent risk culture. 78% of the CR-E risks are perceived as being
surveyed institutions (Figure 8) mostly natural events, and thus a
relatively large number of institutes 61 %
already consider CR-E risks in their
risk culture. The majority of the consider CR-E risks within the
remaining 22% aim to include CR-E operational risk category (Figure 9)12.
risks in their risk culture soon. Nonetheless, CR-E risks
No Yes
10
See Capgemini Research Institute (2020), Digital Mastery – How organizations have progressed in their
digital transformations over the past two years, (accessed Feb, 2021), bit.ly/Digital_Mastery
11
See EBA (2020), Final Report – Guidelines on loan origination and monitoring
12
This question was not relevant for 11% of the participants
11G R E AT E X P EC TAT I O N S : C L I M AT E R E L AT E D A N D E N V I R O N M E N TA L R I S K S
DATA & R E P O R T I N G
Data and reporting are
always challenging topics for
Figure 11 | Do you already have or are you
in the process of building a specific data pool "Data availability
organisations, and this is certainly
for CR-E risk?
and integrity is
evident from a sustainability point
of view. In light of this, the ECB key to understand,
has provided specific guidance
22 % and adjust the
on CR-E risks by dedicating two
expectations to these topics13. 33 % management
Also, a high number of regulatory
papers focus on data, reporting,
of climate risks".
and financial disclosure14. This
survey addresses issues directly, 17 %
Recently published research from
formulating questions around the European Commission covered
internal and external reporting a large study on data and ratings15
as well as on the creation of a which showcased the difficulty
data pool through internal or 28 % of collecting data and deriving
external sources. comparable ratings. It is no wonder
that financial markets participants
Not yet Yes, by purchasing external data
are struggling in this regard. On
"Publicly available Yes, through internal data
Yes, both the one hand, the compilation and
reliable data sources aggregation of ESG-related data is
a costly and, most often, a manual
All participants mentioned data
would enable us to as one of the crucial factors to
effort. On the other hand, external
providers often offer biased data
move faster". observe, steer, and manage CR-E
derived through opaque evaluation
risks. However, 22% (Figure 11)
methodologies16. Both lead to a
of the respondents have not yet
lack in comparability across the
started to build up a dedicated data
data that can be large enough to
pool. Almost 45% rely on either
hinder the discourse and slow
gathering data internally or buying
down the development of
external data from providers. One
measures.
third of the participants already
do both.
Figure 12 | Key Issues and improvement potential around ESG data and ratings17
Timeliness, Accuracy, Company Sustainability
Transparency
and Reliability Disclosures
...of ESG ratings regarding: ... of updates to companies´ Lack of standards undermine the
• methodologies deployed profiles within various ESG-related usefulness of company sustainability
(scope, metrics, weightings) rating data & research provider disclosures to investors and puts strain
• quality assurance processes. outputs and systems. on companies
Improvement results/wishes: Improvement results/wishes: Improvement results/wishes:
• more effective output utilization • better ESG data quality and consistency • commonly accepted formalized
• understanding ratings divergence • ability to directly correct own information naming structure to describe ESG-
• selecting ratings that align with their • fewer concerns over metrics and related products and services
own objectives aspects of assessment • better performance assessment
companies
13
See ECB (2020) Guide on climate-related and environmental risks, pp. 4-5.
14
See for example EBA – Survey: Pillar 3 disclosures on ESG risks, ECB (2020) ECB report on institutions’ climate-related and environmental risk disclosures or TCFD –
Disclosure Guidance on Risk Management Integration and Disclosure.
15
See EC (2021) Study on sustainability-related ratings, data and research.
16
ibid.
17
Internal reseach by Capgemin Invent (2020)
12In sum, the demand on financial Two thirds of the respondents Figure 14 | Do you publish a sustainability
report?
service providers to provide more already have an internal reporting
transparent, timely, accurate, process in place for CR-E risks
reliable, and consistent raw data. (Figure 13). In most cases these
Making data publicly available reports go directly to the 17 %
could be a first step towards management and supervisory
sophisticated data collection. board as sustainability topics are 28 %
One such example can be found now of high interest for the top
in the Netherlands, where real management. For some institutions
estate data is made publicly available these reporting efforts are handed 16 %
with detailed information that to the operational departments
can be used to assess ESG-ratings where dedicated targets are
properly. tracked and managed. In these
organisations, the expectations
For the purposes of internal of regulators and supervisors 39 %
reporting, institutions are expected are prevalent throughout the
to report aggregated risk data. entire organisation, reflecting
No Yes, as a separate individual report
In principle, the same approach the institution’s high CR-E risk Yes, as a part of the annual financial statements
can be applied for proper reporting maturity level. Y
es, both
of CR-E risks, offering regulators
and public stakeholders alike CR-E Institutions are also expected to Transparency of market
risk data through established publish meaningful information participants will foster a proper
reporting channels. and key metrics on climate- management of climate-related
related and environmental risks. and environmental risks. Further-
Figure 13 | Do you already have an internal
The requirements with regards more, it will help consumers as
reporting in place for CR-E risks? to disclosure and transparency of well as relevant stakeholders and
financial market participants have shareholders to simultaneously
already begun to increase, and comprehend the efforts taken by
the speed of this development is the institution in the direction of a
expected to pick up rapidly starting better climate-adjusted portfolio
from 2022 onwards. and business model.
33 %
Slightly more than one fourth
of respondents do not have a
sustainability report yet. But 72%
already have an individual report or
67 % a dedicated section in the annual
financial statement.
No Yes
13G R E AT E X P EC TAT I O N S : C L I M AT E - R E L AT E D A N D E N V I R O N M E N TA L R I S K S
SUMMARY AND DISCUSSION
The study was conducted to A fit for purpose set up of Another difficulty stressed by the
provide a DACH plus NL wide governance and risk management participants is the consideration
snapshot of financial institutions structures is crucial to successfully of CR-E risks in risk categories
with respect to CR-E risk. The reflect any adaptations. Half of and their inclusion into stress
focus was on current strategies, the respondents already have scenarios. These issues can be
approaches to governance and risk governance and management exacerbated by a lack of data
management, as well as data and measures designed to manage CR-E availability and quality. More than
reporting maturity levels. Most risks, although not necessarily in 75% of participants have started to
respondents reported that their dedicated committees or panels. build a dedicated data pool, either
firms’ business models are at least Nonetheless, the respondents by leveraging internal resources
moderately affected by these have set in place KPIs and KRIs to or by buying data from external
risks, with the majority having disclose and manage these risks. vendors. Good data availability and
adapted their firms’ strategies Institutions recognise that internal quality are central for the creation
accordingly. Respondents confirm sustainability measures are an of management metrics and the
a growing awareness of CR-E important signal to other market enhancement of internal and
risks and the related potential participants. external reporting capabilities.
pitfalls and opportunities
presented by an adapted business
strategy. Additionally, banks
are conscious about increasing
regulatory requirements.
The following recommendations are drawn from the findings:
Strategy: Governance & risk: Data & reporting:
• Use the current situation to • Develop a risk culture that • Capitalise on the existing
generate positive social and reflects sustainability and internal data aggregation
economic impact leverage it as a positive signal to practices to optimize the
the market and with your staff data repository
• Implement internal changes that
enhance the credibility and the • Incorporate CR-E risks within • Leverage the maturity of the
trustworthiness on your brand other risk categories to leverage internal reports to establish or
existing processes enhance external reporting
• Establish yourself as an
innovator in the market by • Prepare for regulatory
driving sustainability projects challenges proactively by
(e.g. Target Operating Model) incorporating CR-E risks into
early stress scenarios
Unsurprisingly, the financial services sector has begun to adapt to the challenges that come with CR-E risks. Still,
there is a lot of ground to cover. Top-down governance mechanisms, including stringent reporting lines need to be
enriched with CR-E risk awareness to manage and steer in a sophisticated way. Data is an enabling factor and must
therefore be collected in a plausible and reliable way. A lot of this data (e.g. in KYC-related data pools) lies already
within the institutions, as stated by some participants, and could be reused to establish a proper database for CR-E
risks. Furthermore, adjusting the current methods to integrate CR-E risks in the overall landscape properly should
be included in every upcoming change project if not yet happened. Future target operating models of the financial
services sector will have to acknowledge CR-E risks in every part of the organisation.
14CAPGEMINI INVENT–
S O LV I N G S U S T A I N A B I L I T Y
CHALLENGES IN THE
BANKING INDUSTRY
As a globally renowned technology and digital
leader, Capgemini inherits the responsibility, the
ambition, and the means to contribute to solving
major societal questions that shape our world –
and at Capgemini Invent we are contributing to
making this ambition a reality.
Invent for Society showcases how social impact
is part of the fabric of what we do for our clients
every day.
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CARE ENVIRONMENT TRUST
Helping our clients find inventive Guiding our clients to build and Leveraging AI and data to help
solutions to improve how health deliver their low-carbon strategies. meet trust challenges from
and social care are provided. citizens while reinforcing digital
human rights.
For more information, please visit:
https://www.capgemini.com/service/invent/invent-for-society/
15F O R M O R E I N F O R M AT I O N ,
P L E A S E C O N TA C T:
Author APAC North America
Marco Meyer Samuel Levy-Basse Jennifer Lindstrom
marco.meyer@capgemini.com samuel.levy-basse@capgemini.com jennifer.lindstrom@capgemini.com
Belgium Norway
Ilda Dajci Liv Fiksdahl
ilda.dajci@capgemini.com liv.fiksdahl@capgemini.com
DACH Spain
Joachim von Puttkamer Carmen Castellvi
joachim.von.puttkamer@capgemini.com carmen.castellvi@capgemini.com
France Sweden & Finland
Julien Assouline Johan Bergström
julien.assouline@capgemini.com johan.bergstrom@capgemini.com
India UK
Lalit Desiraju Nathan Summers
lalit.desiraju@capgemini.com nathan.summers@capgemini.com
Netherlands
Alexander Eerdmans
alexander.eerdmans@capgemini.com
16About Capgemini Invent As the digital innovation, consulting and transformation brand of the Capgemini Group, Capgemini Invent helps CxOs envision and build what’s next for their organizations. Located in more than 30 offices and 25 creative studios around the world, its 7,000+ strong team combines strategy, technology, data science and creative design with deep industry expertise and insights, to develop new digital solutions and business models of the future. Capgemini Invent is an integral part of Capgemini, a global leader in partnering with companies to transform and manage their business by harnessing the power of technology. The Group is guided everyday by its purpose of unleashing human energy through technology for an inclusive and sustainable future. It is a responsible and diverse organization of 270,000 team members in nearly 50 countries. With its strong 50 year heritage and deep industry expertise, Capgemini is trusted by its clients to address the entire breadth of their business needs, from strategy and design to operations, fueled by the fast evolving and innovative world of cloud, data, AI, connectivity, software, digital engineering and platforms. The Group reported in 2020 global revenues of €16 billion. Get the Future You Want | www.capgemini.com/invent The information contained in this document is proprietary. ©2021 Capgemini Invent. All rights reserved.
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