Environmental, Social, and Corporate Governance (ESG)

It is a framework of Environmental, Social, and Corporate Governance standards.

ESG is used as an integrated framework to assess the environmental, social, and governance performance of companies and institutions, as the world has witnessed a fundamental shift toward adopting responsible and sustainable practices. ESG has evolved from a voluntary approach into a strategic necessity in the modern business environment, becoming a core component of corporate strategy and attracting the attention of investors, governments, and communities alike. Understanding ESG goes beyond knowing the acronym; it extends to comprehending its three components and their interrelated impact on the success and sustainability of institutions.

Adopting ESG standards as a strategy for risk management and maximizing a bank’s market value is increasingly critical. In light of the direction of the Central Bank of Iraq (CBI) and international institutions such as the International Monetary Fund (IMF), compliance with these standards will become a fundamental requirement for opening international credit lines and facilitating correspondent banking relationships.

Through the implementation of ESG standards, the following outcomes must be achieved:

1. Establishing an ESG function, defining its organizational structure, and specifying its roles and responsibilities.

2. Approval of the ESG Standards Manual and the Corporate Sustainability Policy by the Board of Directors.

3. Adoption of the Environmental and Social Risk Management (ESRM) Manual and its formal inclusion within the credit policy.

4. Conducting the initial materiality assessment matrix and defining indicators and targets accordingly.

5. Issuing the first sustainability report (in accordance with the GRI framework).

6. Launching green and/or social financing products.

7. Achieving training and capacity-building objectives for the Board of Directors and senior management.

8. Formally incorporating ESG risks into the bank’s annual risk management reports.