About Our Client
Our client is a multinational banking and financial services company with branches in over 60 countries. They offer a variety of banking services to individuals, business entities and large institutions.
The Challenge
To align with the United Nations Environmental, Social, and Corporate Governance (ESG) guidelines, certain bank transactions require an Environmental and Social Risk Analysis (ESRA) assessment to determine if they can be approved.
- Generating a transaction’s ESRA assessment is manual and time-consuming. It also requires multiple systems, the consolidation of which is a complex process.
- Transaction ESRA assessment is the key indicator to determine if the deal can be proceeded with. Currently, the risk of errors in this manual process is high, and all errors need to be handled and managed through manual rework.
- Data accessibility, availability and quality vary by client (such as by region, by product type and by transactions).
The Objective
Our client oversees an extensive portfolio of 2.5 billion sustainable finance assets, with approximately 90% of these assets located in developing countries. Their key products and services are sustainable savings accounts, green vehicle loans, sustainable time deposits and more. The objective of transaction ESRA assessments is to cover the following key drivers:
- Outline the environmental and social criteria and encourage the bank’s clients to align with the same
- Support the consolidation of various client assessments to provide a holistic view of the business
- Support the re-platforming of existing transaction ESRA assessments to a common platform, which will be a one-stop shop for all assessment details and provide the assessment information to various downstream systems
The Solution
To comply with ESG regulatory requirements and align with the United Nations’ Sustainable Development Goals (SDGs), the bank has invested in the development of an ESG Navigator.
The ESG Navigator optimizes ESG risk management by using data analytics and streamlines risk assessments while generating insights. It covers multiple sustainability projects, such as Climate Risk Assessment (CRA), Client ESRA, Transaction ESRA and Reputational and Sustainability Management Report (RSRMA). HCLTech has collaborated with the bank to develop the Transaction ESRA capability to facilitate assessing transactions for adherence to the Environment and Social Risk Management (ESRM) guidelines.
The transaction ESRA assessment application aims to automate the existing manual process of assessment into a workflow-based automated process. This application helps credit teams in deciding if they can proceed with a particular deal. The application is built using a workflow management system, where the case flows through various user personas (Deal Team Maker, Deal Team Leader, ESRM Head, ESRM Team Members and Transaction ESRA Viewer).
Application functionality
Key aspects include:
- Transaction ESRA is based on the deal and whether it requires an assessment as per the guidelines in the ESRM framework
- Based on the assessment outcome, the relationship managers who are part of the deal decide if the deal can proceed — the assessment is a key driver for the other credit teams to decide on a particular deal
- The application fetches the deal information and client information from the Client Information System (CIS)
- Transaction ESRA uses a set of questionnaires to assess the outcome based on the responses provided
Questions are classified across five sections:
- Initial Questionnaire: To determine which ESRA category the deal will fall into
- Equator Principles (EP) Questionnaire: A set of principles laid down as per the ESRM guidelines
- Non-EP Principles: To assess whether the deal does not fall under the ESRM guidelines and therefore does not require the assessment
- Reputational Questionnaire: To assess any negative media or campaigns
- Sectoral Questionnaire: There are 14 defined sectors with questions pertaining to the deal
Based on the response provided for each of the questions across these sections, an outcome is displayed section-wide. This outcome can be compliant, near-compliant or non-compliant. The consolidated outcome based on the responses provided is generated automatically for the case.
Workflow:
The application permits the deal maker to capture the responses to the questions across these five sections, and an outcome is generated. With this generated outcome, the case is sent for review to the deal team leader. In certain cases, based on the outcome generated, the deal team leader can send the same to the ESRM team for additional review and approval.
Key features of the solution:
- Integrates understanding of sustainability considerations in solution-building
- Cross-pollinates the knowledge from multiple ESG-driven engagements
- Streamlines the application's processes by adopting best practices from initiatives we participated in
- Completes digitization of Transaction ESRA deals to fulfill the bank’s audit requirements
The Impact
The solution HCLTech implemented for the bank delivers three key benefits.
- Offers ESG insights to steer business strategies to align with the ESG guidelines
- Enables engagement with clients on ESG business needs and transitions in line with the bank's strategies on the ESG initiative
- Completes automation of the process, allowing data to be picked up by other downstream systems, resulting in easy management and improved compliance
