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“In the future, we need to be able to rate companies on the basis of greenness and use that as criteria for evaluating the riskiness of a company’s investments,” Mark Luscombe, SEB Bank’s UK country head, tells The Global Treasurer.

Today banks look at companies’ credit ratings. However, rating agency Standard & Poor’s (S&P) has a team of about 20 people working on developing a framework around sustainability.

“The way we’re approaching our clients (and I hear several other banks too) will be increasingly incorporating environmental, social and governance (ESG)-related factors in their credit assessments,” argues Luscombe.

Companies will be asked what they are doing to address sustainability issues and whether this is potentially going to be a future issue, he says. For example, companies may have assets that could be classified as stranded assets in the future.

If there is no more demand for certain assets, such as fossil fuels, that will be incorporated into the company’s credit assessment, Luscombe says.

Read more on this topic here.

Vicky Beckett

Editor, The Global Treasurer