Banks can tap ESG standards advisory potential: Crisil

Indian banks have an opportunity to deepen relationships with corporate clients by advising large and midsize companies in implementing environmental, social and governance (ESG) standards and goals. As domestic banks hold key corporate banking relationships, they are in a position to provide added value by advising on ESG data and standards, ratings agency Crisil said in a report by Coalition Greenwich, a vertical which provides analytics to the financial services industry.

Nearly a third of large Indian corporates and almost two-thirds of middle market companies have yet to establish clear and tangible ESG goals or targets. In industry segments such as real estate, only about 20% companies have adopted such ESG measures. Across the board, far fewer companies have adopted ESG metrics in their treasury function.

To date, companies say foreign banks have taken the lead on this issue by being the most active in approaching their clients about ESG. As ESG standards and norms evolve further and crystallize into more well-defined frameworks, there is an opportunity for banks to partner with firms and help navigate their ESG journey, the agency said.

On the digitalisation side, senior corporate treasury professionals place working capital management and digitisation of firm-wide treasury processes at the top of the list by a wide margin, the ratings agency said. The focus on digital efficiency is playing to the strengths of large private banks, which are now reaping the rewards from significant past investments in digital capabilities. The digital experience is having a growing influence over companies’ allocation of their banking wallet, and companies give top ratings to the experiences provided by private banks.