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Financial Materiality of ESG: Integrating ESG into decision making and reporting

Navigating ESG and climate change in decision making - The crossroad between corporates and financial institutions

ESG Criteria Training Course

A one-day course

This course is suitable for:

  • Banking and finance professionals who want to build their knowledge and understanding of ESG issues, including the key concepts and approaches, the main frameworks and tools for assessing and managing ESG risks and impacts, and the regulatory and reporting landscape
  • Managers and risk professionals wishing to understand and quantify the financial materiality of ESG impacts and establish or improve ESG risk management and control frameworks within their organisations
  • Senior managers in banks, institutions and organisations wishing to better understand the ESG risks which might impact their operating environment and how they might be managed

  • Focus on how sustainability and ESG factors impact business and the economy
  • Thorough analysis of the key concepts and terminology used in the ESG space, including components of ESG, physical and transition risk, and dual materiality
  • Comprehensive overview of approaches, frameworks and tools used for assessing and mitigating the financially material impacts of ESG risks
  • Global learning perspective based on international ESG experience
  • Practical application of learnings from the course in group exercises, embedding knowledge and best practice on assessing and mitigating ESG impacts

  • Assess their company and clients’ vulnerablity to financially material ESG issues and to integrate ESG into their decision making and reporting.
  • Understand what factors are driving its growth and importance to regulators.
  • Understand how environmental, social and governance factors can impact financial performance, and their transmission channels to revenue, cost, capex and opex
  • Become familiar with global ESG frameworks, including the SDGs and the Paris Climate Agreement, and evolving reporting requirements, such as TCFD.
  • Gain awareness of their clients’, customers’ and stakeholders’ expectations regarding ESG and the risks and opportunities these may pose to companies.
  • Appreciate the difference between physical and transition risks, how they manifest and how they can be managed.
  • Discover and explore the different approaches being used to measure ESG risks and mitigate their impacts.
  • Apply the learnings from the course in two group-based exercises assessing two sectoral-based case studies on financially material ESG impacts.

Background to Sustainability and ESG

  • What is sustainable development?
  • What are Environmental, Social, and Governance (ESG) factors?
  • Sustainable finance and key growth drivers
  • Environmental factors
    • Ecosystem services
    • Planetary boundaries
    • Extreme weather events
    • Deforestation & biodiversity loss
    • Oceans & freshwater pollution
  • Case Studies: Impact of floods in Asia on hardware costs and drought in Colorado river on agricultural product pricing
  • Social factors
    • Economic & gender inequality
    • Impact of globalisation and the Gig Economy
    • Worker mistreatment & poor health & safety
  • Case Studies: Rana Plaza building collapse, Boohoo and IT supply chain
    • Changing consumer expectations (Millennials)
  • Governance factors
    • Role & make-up of board
    • Compensation and ESG-linked KPIs
    • Monitoring & reporting
  • Case Studies: Theranos, Wirecard, FTX

 ESG approaches and materiality

  • Characteristics of different ESG approaches
    • Exclusions
    • Best-in-Class / Positive Screening
    • Thematic investment (tracking ESG megatrends)
    • Impact Investment (focus on impacts on society and the environment)
    • ESG integration into financial models
    • Case Study: Integrating ESG into the cashflow model
  • Materiality of ESG
    • What is financial materiality?
    • ESG factors and financial materiality
    • Impact of ESG risks at macro and portfolio level
    • Transmission channels for ESG risk
    • How ESG factors impact companies’ financial performance
  • Case Study: ESG, coal and bank financing
  • Negative impacts of ESG
    • GHG emissions & pollution
    • Deforestation
    • Child labour & poor worker safety
    • Poverty & lack of a living income
    • Governance failures
  • Case Study: Brazil’s ‘Car Wash’ bribery scandal
    • SASB Financial Materiality Framework

 Data and risk assessment

  • ESG data and ratings
    • Paid versus Free Data Sources
    • Different approaches to assessing ESG risks
      • Refinitiv
      • S&P Global
      • MSCI
    • Correlations between different ESG data providers
  • ESG assessment
    • Understanding ESG risks at the country, sector and firm level
    • How do banks identify & assess ESG risks?
    • Assessment tools, including PACTA & ENCORE
    • Assessing ESG impacts on key sectors
      • Oil & Gas
      • Agriculture
      • Construction & industry
      • Manufacturing
      • Aviation
  • Group Exercise: Assessing financially material ESG impacts in the automotive sector
    • For this exercise, participants will go into small break-out groups and assess the Environmental, Social and Governance risks affecting the automotive sector. Each break-out group will quantify each ESG risk and assess its financially material impact, for sharing in group discussion at the end of the exercise.

ESG and the transition to a net-zero carbon economy

  • What is climate change and what are its key impacts on business?
    • Human-driven activity is driving climate change
    • Key sectors responsible for GHG emissions
    • Economic impacts of climate change
  • The low-carbon economy
  • Regulating the ‘transition’
    • Key guiding frameworks
      • Sustainable Development Goals (SDGs)
      • Paris Climate Agreement
      • UN Global Compact
    • Net Zero targets and Nationallly Determined Contributions (NDCs)
    • Areas of ESG regulation affecting banks
    • The evolving regulatory landscape on climate & sustainability
    • Key guiding frameworks & approaches
      • UNEP-FI Principles for Responsible Banking (PRB)
      • Science Based Targets initiative (SBTi)
    • Reporting requirements
      • TCFD
      • National legislation
      • TNFD & UN Global Biodiversity Framework

 Assessing Physical and Transition Risk

  • Physical risk
    • Acute versus chronic weather impacts
    • Varying impacts across sectors
  • Case Study: Impacts of extreme weather events in Thailand (2011 flooding) and Germany (2022 drought)
  • Transition risk
    • ESG risk transmission and the credit cycle
    • Key transition sectors
  • Case Study: Impacts of transition risk, including chocolate (carbon tax), livestock (nitrogen reduction) and hydrocarbons (Shell Oil))
    • Understanding transition risk in context
    • The need for a ‘just transition’
  • Case Study: Modelling transition risk at the sector level with the Cambridge Transition Risk Framework
    • Net Zero expectations of banks, customers & stakeholders
    • Financing opportunities in transition sectors
  •  Group Exercise: Assessing the ESG impact on a client
    •  For this exercise, participants will go into small break-out groups and study one of the following two case studies: Oil & Gas or Automotive Sector. The exercise will take the previous exercise one step further, identifying the ESG risks, assessing their financially material impacts, and suggesting mitigation measures. Once complete, all groups will share their findings in a general group discussion.
  • Wrap up and key takeaways
  • Final questions

The trainer is a thought leader, strategic advisor and professional trainer specializing in emerging markets, international supply chains and sustainability issues. With experience in fixed income, commodities financing, syndicated loans, fintech and agritech, he brings a wide range of experience in some of the most dynamic areas of banking. He has worked with international banks, multilateral financing institutions, hedge funds, and investment funds across the globe, and with multinational corporations that have operations in Africa.

The trainer has extensive experience as a presenter, lecturer and trainer, both through his work in banking and as a speaker on the international conference and webinar circuit. He has delivered professional training on a diverse range of topics, including structured commodity finance (for Afreximbank in Egypt and Kenya), the African fintech landscape, sustainable finance and the impact of ESG issues on international trade and supply chains.

He has been a guest lecturer at King’s College London (KCL), SOAS, the Chicago Booth School of Business and the Hult International Business School, presenting on fintech in emerging markets and the intersection between disruptive technology and sustainability. He also appears regularly in the press and media as a commentator on issues related to African markets, international trade, commodities, fintech and ESG.

Prior to setting up his firm, Kleos Advisory Ltd, in 2019, he was Head of Research at pan-African bank, Ecobank, where he oversaw a team of a dozen analysts spread across the bank’s African footprint who produced research on fixed income, currencies and commodities (FICC) for the bank and its clients. He was also head of the bank’s UK Representative Office in London, which included the bank’s teams managing relationships with multinationals and international organisations such as the World Bank, the IFC and World Vision. Prior to working at Ecobank, he was a Senior Economist at the Economist Intelligence Unit (EIU), covering nine African countries and 25 commodities, divided between industrial raw materials and food, feedstuffs and beverages.

The trainer holds a First Class BA in Hispanic Studies (Spanish & Portuguese) and a PhD in political science, both from the University of Bristol. He also has a Certificate in Economics from Birkbeck University and has undertaken various trainings in structured commodity finance and global supply chains. He is fluent in English, French and Spanish and trains in all three languages.

Assessing the impact of ESG risks on financial performance is becoming a critical part of strategic decision making, as well as a growing reporting requirement from regulators. This puts the onus on companies to build internal capacity so that they can understand the risks facing their operations, assess their impacts, report on them and develop measures to mitigate them. This concentrated course covers all the necessary elements to provide delegates with a thorough understanding of what ESG risks are, their financially material impacts, and the approaches, frameworks and tools used to assess ESG risks and impacts and integrate this into strategic decision making and regulatory reporting processes.

  • This course had a detailed overview of ESG criteria and outlined the possibilities of analysation of ESG criteria
  • The lecturer was very knowledgeable and was speaking in a engaging, interactive manner.
  • The reference material was comprehensive
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