Risk Perspectives ESG:  E – Energy Efficient

Financial Services are closely embedded with local communities. Recent focus on ESG risks and controls are getting noticed but mostly on a national and international level. While the SEC has encouraged new reporting for all financial institutions on environmental impacts we often wonder is there something more that local organizations like Community Banks and Credit Unions can do in supporting the spirit of ESG compliance not just the regulations.

ESG encourages management focus on three general areas. One of those is Energy efficiency. This includes, but is not limited to:

• Carbon foot-printing
• Greenhouse gas emissions
• Deforestation
• Bio-diversity
• Climate change
• Pollution migration
• Waste management
• Water usage.

For many community banks and credit unions this list may only include one or two areas of direct impact. By providing leadership in those areas management demonstrates their commitment to the long-term viability and growth of their communities. However, this does not mean that management cannot opine on or support more global energy efficient initiatives on climate change, deforestation and greenhouse gas emissions.

In fact, regulators expecting management and Board of Directors to demonstrate an understanding of ESG impacts, the risks associated with ESG and include those risk discussions in management meetings. Boards of directors are required to participate in setting the proper tone and ensuring that management is adequately focused on ESG risks and controls.

This is important for community banks and credit unions from another perspective as well. Investors are looking to invest in companies that are serious about ESG and energy management. This interest translates directly to public community banks looking to provide significant investment value.

For Credit Unions, who grow their companies through member satisfaction and referrals, attracting a younger generation that is keenly aware of and supportive of protecting natural resources, seems like a natural business approach.

Finally, while not active on global or even national levels, Community Banks and Credit Unions can contribute to state and local efforts and education around energy efficiency. This is showing leadership and provides confidence that both the institution and the community will be sustainable.