ISEAL Efeca Report: Key Findings on Sustainability Risk

Developing Risk Profiling Methodologies – insights from financial services in the quantification of sustainability risk at different spatial scales

We are delighted to share this synthesis report, written by Efeca and Federica Chiappe for the ISEAL Alliance and aims to provide insights from a range of financial sector players in order to strengthen ISEAL members’ understanding of and approaches to sustainability risks.

To support the improvement of monitoring and assurance programmes of ISEAL members, ISEAL commissioned Efeca to conduct research on the methodologies used by the financial sector to assess sustainability risks (and how financial institutions approach complex sustainability risk profiling), in order to gain insights that can be transferred to ISEAL members to strengthen their understanding of how to use multiple sources of information to detect and verify sustainability risks both of certified entities, and at greater spatial scales.

Key learnings include:

• Need for standardisation due to the high degree of fragmentation in the broad sustainability sector.
• A useful way to structure sustainable financing that can be applicable to certification schemes is through the ‘A-B-C’ approach – Avoid (A), Benefit (B) and Contribute (C)
• There are two priorities for the financial sector: carbon / GHG footprint and governance.  The creation of a ‘universal language’ could strengthen links between standards and supply chain actors.
• Larger commercial banks and insurance companies have led the way in integrating sustainability in their due diligence
• Organisations are already using a wide variety of tools and methods for identifying sustainability issues among suppliers and certificate holders, often quantifying the risks; and
• Certifications need to be rigorous to be recognised for sustainability risk assessments

Please find the full report here: Developing Risk Profile Methodologies.