Financial institutions face regulatory compliance as primary challenge in climate risk management

The survey validates institutions’?shift from merely appointing consultants to identify ESG and climate risks, towards implementing concrete measures for risk management, says expert

Published - July 11, 2024 10:14 pm IST - Chennai

A recent survey of more than 70 financial institutions worldwide found that 52% of them identify regulatory compliance as the primary challenge in managing environmental, social, and governance (ESG) risks and climate risks.

The survey by BCT Digital, a fintech solutions organisation, captured insights from 77 financial institutions based in the Asia-Pacific, North America, Europe, West Asia, and North Africa regions, according to its CEO Jaya Vaidyanathan.?

It found that over 72% of the companies plan to spend up to 500,000 USD or more on ESG technology. In this bid, over half of the institutions feel keeping up with changing regulations is the biggest ESG-related challenge.

Approximately 48% of respondents highlighted the challenge of conducting risk assessment and mapping for relevant ESG factors, while an equal percentage identified integrating ESG considerations into operational and financial workflows as significant hurdles.

With respect to climate risk, the main challenges were meeting regulatory stress testing expectations (67%), accurate greenhouse gas accounting (56%), and integrating climate risk operationally into product lines (50%).?

At a press conference on Thursday, Ms. Vaidhyanathan said the survey validates institutions’?shift from merely appointing consultants to identify ESG and climate risks, towards implementing concrete measures for risk management.

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