Sustainability (ESG) risks: vision and perspectives in the region

What it is about

Yves Ferreira, regional representative for the Caribbean of the European Investment Bank (EIB), explained at the First Annual Risk Conference (September 2023) what ESG risks are and how to manage and report them.

The 38-slide presentation explains the three pillars (environmental, social and governance) with real examples, the benefits of an ESG strategy, the UN Principles for Responsible Investment, how ESG ratings are calculated, the state of progress in Latin America and the Caribbean, and international reporting frameworks and standards.

Objectives

• Define ESG risks and distinguish their three pillars with concrete examples.
• Explain how ESG ratings and responsible investment principles work.
• Provide guidance on sustainability reporting frameworks and what a good report should include.

Key takeaways

1. ESG risks can cause reputational damage or financial harm and affect all stakeholders: shareholders, boards, employees, customers, suppliers and regulators.
2. They are illustrated with well-known cases: BP's Deepwater Horizon spill (2010) for environmental, the Rana Plaza factory collapse (more than 1,100 deaths) for social, and the Volkswagen case for governance.
3. External agencies calculate ESG scores (for example MSCI, Bloomberg, Refinitiv and JUST Capital) with their own environmental, social and governance criteria.
4. ESG implementation in Latin America and the Caribbean lags behind Europe and North America, and governments are at different stages of developing legal frameworks.
5. Demand for ESG information is intense; a good report follows a cycle (planning, stakeholder dialogue, materiality, data collection and preparation) and relies on verifiable data and international frameworks.