Crédit Agricole: integrating ESG factors in customers credit applications

Abstract

The aim of this paper is to assess the existence and the extent of the impact of ESG issues on the Credit Assessment - tool used by banks to attribute to their own customers the appropriate creditworthiness class - focusing the analysis on the perimeter of the Crédit Agricole Italia’s business customers. In fact, the thought is that the inclusion of variables of sustainability in credit scoring models can have a positive impact on the growth of banks and the financial market in general, but it is necessary to determine the existence of a concrete link between the two, and therefore identify the nature of a possible one correlation. Sustainable finance can generate long-term economic and social value thanks to the use of both financial and environmental, social and governance logics in the determination of investment choices and granting of credit. The market has indeed proven to reward behaviors recognized as virtuous in the three elements of "Sustainability": environmental (E), social (S) and governance (G). A strategy aimed at "Sustainability" is therefore able to guarantee numerous benefits. Crédit Agricole Italia uses both traditional economic-financial criteria and new socio-environmental criteria, in assessing the creditworthiness of customers. This implies that companies that have a non-virtuous profile in these terms will have greater difficulty in accessing credit, while businesses with sustainable impacts positive, appropriately measured and reported, can benefit from funding privileged conditions. Starting from the main role that banks play in the financial market, the paper has the objective of demonstrating how much it makes necessary, and could be decisive, an intervention by the banking world to guiding the choices of the companies themselves in favor of eco-sustainability. Furthermore, starting from the fact that ECB expects banks to evaluate and disclose the ESG features of their customers, the thesis underlines how this action is still undiversified all around the bank world, aiming to propose a unique and regulated guidelines to evaluate the ESG impact of the firms.