Sustainability Management Systems for the financial sector

The UN’s Sustainable Development Agenda 2030 puts a spotlight on the contribution of the financial sector stakeholders (public and private) to sustainable development. For this agenda to be successful, financial sector stakeholders need to put sustainability at the heart of their thinking. In this context, Sustainability Management Systems allow financial institutions (FI) to identify, assess and measure ESG related adverse and beneficial impacts as well as target positive development impacts.

The aim of such management systems is to avoid, minimize, and compensate adverse impacts as well as to seize beneficial impact opportunities, and to ensure stakeholder engagement across all. With the aim to facilitate development and adoption, ILO Social Finance developed a Sustainability Management System self-assessment tool for financial institutions. Through a series of questions about the current management of ESG and development impact aspects within the financial institution, the portfolio composition and the general organization information, the tool will provide a picture of the development state of the SMS. Additionally, the results will relate the ESG risks of the portfolio composition with the SMS current development state. The responding FI will see the proportion of ESG risk of the portfolio that is being mitigated and the contributions towards positive change and development impact that the FI is supporting. The tool will help the FI identifying gaps for future improvement of the system.

The tool will be published in the course of 2021.