The Road to the SDGs

PURPOSE X To tackle the enormous challenges presented by climate change hazards, leading financial institutions (FIs) have committed to various global standards, including: – The United Nations’ six Principles of Responsible Investment (PRI) – UNEFP-led initiative on Principles of Responsible Banking – The Paris Agreement (with 189 signatories as of February 2020) – The Task Force on Climate- related Financial Disclosures recommendations. X The industry has adopted various approaches to identification, quantification, mitigation and control of ESG-related risks. Markets have developed various mechanisms to manage their exposure and move towards ESG-compliant financing and investments. X MDBs are aligned with ESG initiatives as these are directly linked with the SDGs and best practices. X IsDB has initiated the necessary steps to implement climate-related best practices in its business operations for sustainable development of its MCs. X IsDB aims to ensure that all components of identifying, measuring, mitigating and monitoring ESG risk-related factors are adequately captured, managed and reported in IsDB’s internal credit rating models. This will: – Ensure that IsDB’s portfolio remains climate-friendly while maintaining quality in line with the highest ratings requirements – Facilitate better access to market funding and boost the achievement of relevant SDGs for the benefit of MCs. METHOD X Within IsDB, governance is formalised by policies on environment protection and climate change, as well as by social safeguards for IsDB-financed and -invested projects, together with the adoption of ESG- related disclosure requirements. X Strategy is formulated by considering the risks and opportunities related to ESG issues and their impact on business decisions and financial planning. X Risk management is strengthened by applying quantitative modelling for identifying, measuring, mitigating and managing ESG-related risks at transaction and portfolio levels. X Targets and benchmarks are set and analysed for IsDB’s management to track performance and take informed I n recent years, ESG-related risks have emerged as key focus areas of risk management IsDB is committed to playing a leading role in helping its MCs to manage and mitigate these risks Environmental, social and governance risk ratings Recommendations by the Task Force on Climate-Related Financial Disclosures have received support from over 1,500 organisations globally, with market capitalisation of US$12.6 trillion, and FIs responsible for assets worth US$150 trillion [ 196 ] SDGs