• Sustainability risk drivers amplify traditional financial risks and can negatively impact financial institutions, yet very few of the banks UNEP FI works with report full integration of sustainability risks.  
• Fifty per cent of the 28 banks that responded to UNEP FI’s survey cited difficulty integrating third-party data and tools within existing risk models. 
• Survey analysis suggests that as implementation of sustainability risk management deepens, challenges intensify. 

Geneva, 22 July – The United Nations Environment Programme Finance Initiative (UNEP FI) today launched the Conceptual Framework for Sustainability Risk Integration that sets out a practical approach to help banks embed sustainability risks into core risk management practices, in response to growing supervisory expectations and technical challenges experienced by banks. 

“The banking sector is entering a critical phase where sustainability risks are no longer peripheral considerations but core drivers of financial performance and resilience. This new framework provides the structure banks need to move from uneven progress to systematic integration of sustainability risk drivers across risk management functions,” said Head of UNEP FI, Eric Usher.  

Climate shocks, nature loss and social pressures are increasingly translating into material financial risks, and supervisors across major jurisdictions are progressively embedding sustainability considerations into expectations on the seven core elements of risk management frameworks: risk strategy; governance; risk identification, measurement and materiality; risk taxonomy and scope; risk appetite; risk management actions; risk monitoring and reporting.

The Conceptual Framework for Sustainability Risk Integration, designed primarily for risk professionals at banks, is the first deliverable in a series of guidance documents and tools published by UNEP FI’s Risk Centre that can be directly integrated into banks’ existing risk management frameworks and processes.

This framework is informed by regulations in multiple jurisdictions, as well as the needs and current practices of UNEP FI member banks solicited through a consultation process. The findings of the recent research were published in the UNEP FI Risk Centre’s The Landscape of Sustainability Risk Integration at the end of June.

The landscape report observes that the gap between expanding supervisory expectations and the extent to which sustainability risks have been embedded into banks’ internal risk frameworks is particularly evident in areas such as credit risk modelling, expected credit loss calculations and integration across market, liquidity and operational risk. The report also finds that banks with frameworks already in place are more likely to report integration difficulty than those still considering such a framework, suggesting that the challenge intensifies as implementation deepens.

For media enquiries, please contact Sally Wootton and Miranda Barham.