In today's dynamic financial landscape, the integration of Environmental, Social, and Governance (ESG) factors is no longer a niche consideration but a critical component of robust credit risk management. This training course is designed to equip finance professionals with the knowledge and tools to effectively assess and incorporate ESG risks and opportunities into their credit portfolios. By moving beyond traditional financial metrics, participants will learn to identify potential vulnerabilities and sources of long-term value, ensuring their portfolios are resilient, responsible, and aligned with the demands of modern investors and regulators.

This comprehensive program delves into the practical application of ESG scoring, providing a systematic approach to evaluating and managing the non-financial risks that can profoundly impact creditworthiness. Participants will explore how ESG data and ratings are developed and utilized to inform lending decisions, structure sustainable financial products, and monitor portfolio performance. The course is a strategic investment for financial institutions seeking to build a competitive advantage and demonstrate a commitment to sustainability, while also mitigating risk and fostering a more resilient and future-proof credit portfolio.

Duration: 10 days

Target Audience:

• Credit Analysts
• Portfolio Managers
• Risk Managers
• Investment Analysts
• Relationship Managers
• Sustainability Officers

Objectives:

• Understand the fundamental principles of ESG and their relevance to credit analysis.
• Develop a systematic approach to integrating ESG factors into credit risk assessment.
• Master the use of ESG data, ratings, and frameworks for effective portfolio management.
• Identify and mitigate ESG-related risks while capitalizing on new opportunities.
• Learn how to structure and manage a credit portfolio with a focus on sustainable value creation.
• Align credit strategies with global sustainability trends and regulatory requirements.

Course Modules:

Module 1: Introduction to ESG and Sustainable Finance

• Understanding the ESG landscape and its evolution in finance
• Key drivers for ESG integration in credit and lending
• Defining Environmental, Social, and Governance factors
• The relationship between ESG and financial performance
• An overview of the sustainable finance ecosystem

Module 2: ESG Materiality and its Impact on Credit

• Identifying financially material ESG factors by sector
• Connecting ESG issues to traditional credit risk drivers
• Assessing the time horizon and severity of ESG risks
• Exploring the link between strong ESG performance and lower default rates
• Case studies on how ESG events have impacted credit ratings

Module 3: ESG Data and Ratings for Credit Analysis

• Navigating the landscape of ESG data providers and ratings agencies
• Understanding the methodologies behind different ESG scores
• Evaluating the quality and limitations of ESG data
• Using ESG ratings as a starting point for deeper analysis
• Challenges in data collection and comparability

Module 4: Integrating ESG into the Credit Assessment Process

• Systematically incorporating ESG due diligence into loan origination
• Developing an ESG-inclusive credit scorecard
• Qualitative and quantitative analysis of ESG risks
• Adjusting credit ratings or internal scores based on ESG findings
• Documenting the rationale for ESG-related credit decisions

Module 5: Environmental Risk Scoring for Credit Portfolios

• Assessing physical and transition climate risks
• Evaluating a borrower’s carbon footprint and emissions management
• Analyzing risks related to natural resource use and biodiversity
• Scoring for pollution, waste management, and environmental compliance
• Examining the impact of environmental regulations on creditworthiness

Module 6: Social Risk Scoring for Credit Portfolios

• Evaluating labor practices, human rights, and supply chain risks
• Assessing product safety, customer data privacy, and ethical marketing
• Scoring for diversity, equity, and inclusion
• Understanding community relations and social license to operate
• The role of social factors in reputation and brand value

Module 7: Governance Risk Scoring for Credit Portfolios

• Assessing corporate governance structures and board independence
• Analyzing executive compensation and shareholder rights
• Evaluating business ethics, anti-corruption, and transparency
• Scoring for cybersecurity and data governance
• The importance of internal controls and risk oversight

Module 8: Sector-Specific ESG Analysis

• Applying ESG frameworks to different industries
• Identifying unique ESG risks in energy, manufacturing, and technology
• Understanding the ESG factors in financial services and real estate
• Developing tailored ESG assessment methodologies
• Case studies on how ESG manifests across various sectors

Module 9: Portfolio-Level ESG Risk Management

• Aggregating individual ESG scores to a portfolio level
• Identifying concentration risks related to specific ESG factors
• Developing strategies to mitigate portfolio-wide ESG risks
• Stress testing credit portfolios for climate and social scenarios
• Monitoring and re-evaluating ESG risks over the life of a loan

Module 10: ESG in Lending Products and Structured Finance

• Understanding the mechanics of green and social bonds
• Exploring sustainability-linked loans and their key performance indicators
• Structuring project finance with a focus on ESG outcomes
• The role of ESG in securitization and asset-backed securities
• Pricing for ESG risk and opportunity

Module 11: Regulatory and Reporting Frameworks

• Navigating key global sustainable finance regulations
• Understanding the Task Force on Climate-related Financial Disclosures (TCFD)
• The Sustainable Finance Disclosure Regulation (SFDR) and its implications
• Preparing for ESG-related disclosures and reporting requirements
• Understanding the role of regulators in shaping ESG standards

Module 12: Credit Ratings and ESG Integration

• The growing role of credit rating agencies in ESG
• Analyzing the methodologies of agencies like Moody’s and S&P
• How ESG Relevance Scores are used in credit analysis
• The impact of ESG on sovereign and municipal debt ratings
• Engaging with rating agencies on ESG performance

Module 13: The Future of ESG in Credit

• Emerging trends in sustainable finance and ESG investing
• The role of technology, AI, and big data in ESG analysis
• Exploring new metrics for measuring social and environmental impact
• The path toward a more integrated and standardized ESG framework
• Anticipating future regulatory changes and market expectations

Module 14: Practical Application and Case Studies

• Applying learned concepts through hands-on exercises
• Developing an ESG risk assessment for a sample portfolio
• Evaluating real-world company data and financial statements
• Group work on a comprehensive ESG credit memo
• Presentation and peer review of case study findings

Module 15: ESG and the Broader Financial System

• The systemic risk posed by climate change
• The role of central banks and financial regulators
• Connecting ESG to financial stability and systemic resilience
• Understanding the role of multilateral development banks
• The impact of ESG on capital adequacy and risk-weighted assets

Module 16: Leadership in Sustainable Credit

• Developing a roadmap for ESG integration within your organization
• Communicating the value of ESG to internal and external stakeholders
• Building a culture of sustainability and responsible lending
• Engaging with borrowers to improve their ESG performance
• Action planning and next steps for professional development

Training Approach

This course will be delivered by our skilled trainers who have vast knowledge and experience as expert professionals in the fields. The course is taught in English and through a mix of theory, practical activities, group discussion and case studies. Course manuals and additional training materials will be provided to the participants upon completion of the training.

Tailor-Made Course

This course can also be tailor-made to meet organization requirement. For further inquiries, please contact us on: Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Training Venue

The training will be held at our Skills for Africa Training Institute Training Centre. We also offer training for a group at requested location all over the world. The course fee covers the course tuition, training materials, two break refreshments, and buffet lunch.

Visa application, travel expenses, airport transfers, dinners, accommodation, insurance, and other personal expenses are catered by the participant

Certification

Participants will be issued with Skills for Africa Training Institute certificate upon completion of this course.

Airport Pickup and Accommodation

Airport pickup and accommodation is arranged upon request. For booking contact our Training Coordinator through Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Terms of Payment: Unless otherwise agreed between the two parties’ payment of the course fee should be done 10 working days before commencement of the training.