The main purpose of this study is to caution the Indian banking sector about the possible risks involved during environmental, social and governance (ESG) risks by navigating through them. This article cautions the banks about the certain possibilities of risks that will stake their financial health and growth due to their unfruitful ESG risk decision, which leads to their exposure to various ESG risks. The approach of this article is based on various risks associated with ESG. It has examined the configuration, which is enlightening through the best available literature as a base for this study. Considering current moving patterns, this article identifies the various ESG risks that arise from inappropriate ESG-related decisions taken through the banking sector by utilising previous literature as their explanation base. This research article also suggests that the significant outcome of this study includes ESG-related risks. The first one is environmental risks, which incorporate dangers such as extreme climate conditions influencing borrowers’ assets and transition risks because of administrative changes affecting enterprises with carbon emissions. The second one includes the social risks involving human rights and local area influence, prompting reputational chances assuming banks put resources into organisations with poor practices. The last one, connected with a bank’s governance, risks its consistency with ESG principles, possibly causing lawful questions and reputational harm. This study helps to understand these risks, by which banks ought to coordinate ESG factors into their risk management framework by implanting ESG into their product design and pricing decisions for considering ESG to take a chance in different cycles such as mergers and disclose ESG risks to the stakeholders for transparency. By taking a holistic approach to ESG risks within risk management, financial institutions can enhance their sustainability and resilience in the face of evolving market demands and regulatory pressures.
Kashyap et al. (Thu,) studied this question.