Embedding ESG into risk frameworks is becoming essential for banks navigating new sustainability regulations. Daniel Meneghin of Lunar Bank explains why institutions must integrate sustainability into existing governance and risk processes rather than cre
As
sustainability regulation expands across Europe, financial institutions face a
critical challenge. The real task is not simply complying with ESG reporting
requirements but embedding sustainability considerations into the core risk and
governance frameworks that already shape business decisions.
During a panel discussion at CeFPro’s
recent Vendor Risk Europe event, Daniel Meneghin, Head of ESG and CSRD at Lunar
Bank, Nordics, argued that many organizations risk approaching sustainability
as a separate compliance exercise rather than a strategic transformation.
“There’s a huge gap between the
theory and the practicality of how to do things,” Meneghin said. “Even when
CSRD started, I read the regulation and thought this is way too much.”
For many institutions, new regulatory
mandates such as the Corporate Sustainability Reporting Directive and related
ESG frameworks have introduced complex reporting expectations.
Yet Meneghin stressed that the real
opportunity lies in using these frameworks to drive meaningful organizational
change rather than simply producing disclosure reports.
“I don’t think regulation is an issue
at all,” he said. “In fact it helps companies because it gives you more time to
actually do things and not only focus on the reporting end.”
He explained that some organizations
are choosing to move ahead with sustainability initiatives even when the
regulatory timetable does not yet require full compliance.
In some cases, boards are adopting
ESG frameworks voluntarily as part of broader strategic commitments.
“Some organizations decide they are
going to go all in with the regulations even if they are not yet directly
affected,” Meneghin said.
The biggest obstacle, however, is
structural. Many institutions attempt to create separate sustainability
programs that operate independently from existing governance frameworks.
Meneghin argued that this approach rarely succeeds.
“Sustainability in an organization
derives from risk,” he said. “It is fundamentally a risk exercise.”
Instead of creating new departments
or processes, institutions should embed sustainability considerations directly
into existing enterprise risk management frameworks, operational controls, and
governance structures.
“You need to embed the process and
not build something new,” Meneghin said. “Otherwise there is no buy in, there
are no synergies, and nothing really works.”
According to Meneghin, effective ESG
integration begins with a clear understanding of material risks and impacts
across the organization’s value chain.
Materiality assessments are therefore
essential for determining which sustainability topics genuinely matter to a
bank’s strategy and risk profile.
