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Tietoevry software helps banks assess the ESG- risk profiles of corporate borrowers

Amalie Eikeland

Product Manager ESG and Climate Assessment

Banks and other financial institutions face default risk when corporate clients are penalised for failing to meet climate-change targets. We’ve developed a solution that helps loan officers weigh the risk before granting credit.

New and forthcoming European environmental regulations are increasing the compliance obligations of companies. Those that fail to fulfil their responsibilities – which cover both day-to-day operations and reporting – may be subject to fines or other measures that restrict their business.

These ESG requirements have both a direct and indirect impact on financial-services companies. Not only are they subject to the new regulations themselves, so too are their corporate debtors.

This represents risk to the banks, particularly when borrowers operate in carbon-intensive industries that are subject to strict scrutiny. The green shift is driving significant investment in new technologies – some EUR 350 billion in Europe alone – so banks are keen provide this funding. But they need a reliable way to assess the risk.

Automating ESG risk assessments

Europe’s evolving regulatory framework is the background against which Tietoevry has developed a new ESG and climate-risk solution, currently used by more than 30 financial institutions in Norway. The software module helps loan officers to assess companies’ compliance with climate-change regulations, as part of the credit-granting processes.

“The whole business environment is becoming more demanding in terms of ESG compliance,” says Amalie Eikeland, Product Manager ESG and Climate Assessment at Tietoevry. “Financial-services companies are not just worried about a negative impact on their assets – there’s also a very real reputational risk in lending to a company that goes about things the wrong way.”

“ESG considerations are also driving changes in consumer preferences. Banks do not want to invest in a company or an industry that will become irrelevant within a few years. With this new module we’re helping loan officers to identify, assess and monitor all these risks as part of the credit-granting process,” says Eikeland.

The module assigns would-be corporate borrowers an initial risk profile based on the sector in which they operate. Then a parameter-based questionnaire format – set and weighted by the banks themselves – reveals any additional risk factors for the loan officer to consider. There’s also a field that captures industry-specific challenges and opportunities arising from the green shift. All data is stored for regulatory audits.

Once the ESG risks have been built into a loan offer, the customer is able to see how loan terms could be improved by making climate-friendly adjustments to their business. The tool also flags if a customer is eligible for so-called ‘green financing’.

“There’s reason to believe that carbon-intensive companies may struggle to get financing in the future – or at least not on favourable terms,” says Eikeland. “But these companies are also the ones looking for investment to make the shift to greener business. They’re often high-risk, high-reward prospects for the banks that our solution can help to assess.”

Minimal integration, maximum reach

Risk profiles assigned by the solution are aligned with the bank’s rating-interval system, so loan officers can immediately make the right assessment. There’s also a loose integration with credit-granting facilities to speed up the loan process. The software operates as a stand-alone module with few external dependencies. This allows it to be used by any bank – regardless of their core IT system.

Created by a small pan-Nordic team within Tietoevry Banking, the module is now being further developed in alignment with the EU taxonomy for sustainable activities. This will make it viable for use by financial institutions in other countries too.

“Until now we’ve been focused on developing the solution and adding new features. But our mission has always been to offer this more widely. Now we’re focusing on sales and have already started discussions with several banks outside of Norway,” says Eikeland.


Read more about our sustainability work and how we help to create purposeful technology that reinvents the world for good.

This case is published in our annual report 2022 – read the whole report here.

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