In recent years, ESG (environmental, social and governance) assessment has become a central element in credit risk management, driven by an ever-evolving European regulatory framework and increasing market and stakeholder pressures. In particular, supervisory authorities such as the ECB1 and the EBA2 require the integration of climate and environmental risks into creditworthiness assessment processes, recognising their potential impact on financial stability.
Furthermore, there is evidence in the market of the integration of ESG parameters by significant banks within the RAF, ICAAP, Risk Reporting, AQR (single file review and single collateral review), AIRB and IFRS9 models, Risk Policy, Rating Attribution, and credit policies and strategies. In this context, the present study aims, on the one hand, to provide a general overview of the relationship between sustainability and credit risk, with particular focus on a large sample of Italian companies; and on the other hand, to specifically analyse businesses located in the Veneto region, highlighting the sectoral and territorial specificities that influence the management of climate, environmental and natural risks at the local level.
The methodology adopted in this study involves integrating ESG indicators into traditional rating models for credit risk analysis concerning bank portfolios in the corporate segment. For the indepth analysis of Veneto, advanced techniques are used to estimate exposure to both physical climate risks (such as floods and heatwaves) and transition risks linked to decarbonisation. In addition, two new indicators related to natural capital—"Impact" and "Dependency"—are introduced, which respectively measure the environmental impact of SMEs and their dependence on natural resources.
The purpose of this document is to reaffirm, in line with previous3 statements, the increasingly close relationship between sustainability and credit performance, while also providing an indepth perspective on the evolution of Veneto-based companies in managing climate, environmental and natural risks.
