Sustainability Due Diligence for Banks

A 2024 survey conducted by Stanford University and the MSCI Sustainability Institute showed that more than 90% of the world’s largest institutional investors considered sustainability criteria important in their overall investment decisions.

For sustainability due diligence on private companies, however, the lack of accessible and consistent data complicates matters, as these firms are not subject to the same level of reporting requirements as listed companies. Banks are particularly exposed to this challenge because a significant portion of their lending counterparties are private.

In this paper, we describe the best practices in sustainability due diligence observed among global banks, leveraging their comprehensive disclosures and experience in integrating sustainability risk and opportunity assessment into financing activities. We also provide guidance on how banks can apply MSCI ESG Ratings methodology and data to help manage financially material sustainability risks.

Process flow for banks to conduct financially material sustainability due diligence on private companies

This chart demonstrates examples of sustainability integration in the lending process and does not constitute advice on business operations or lending decisions. Source: MSCI ESG Research