Credit Relations from an ESG Perspective

This chapter provides an analysis of the development of Environmental, Social, and Governance (ESG) paradigms in the financial system through an in-depth examination of European regulation and banking supervision and their impacts. The chapter explores how these regulatory frameworks define ESG behavioral and disclosure standards in the credit market and promote sustainable finance practices that are aligned with broader policy objectives. We then discuss the interaction between mandatory disclosure requirements and the assessment of corporate credit risk, exploring how banks can incorporate ESG factors into risk management processes, also in light of recent developments in scientific research. The overall objective of the chapter is to provide a conceptual framework for understanding the impact of ESG regulation on the behavior of banking operators and companies accessing the credit market.