The Impact of the Implementation of Sustainability Principles on Financing Risk

Environmental, social, and governance (ESG) risks, considered as part of operational risk, can also lead to the materialization of credit risk. The implementation of ESG factors in the credit process and the development of products based on sustainability principles, with positive effects on the environment, society, and banking performance, are crucial. Banks that incorporate ESG risk factors in their credit analysis processes demonstrate better financial performance and acknowledge that the failure of credit institutions to address environmental, social, and governance factors affects the sustainability of the enterprises they finance.