Financial Crime World

Banks Under Scrutiny: Central Bank of Iraq Releases ESG Scorecard Report

The Central Bank of Iraq (CBI) has released the results of its Environmental, Social, and Governance (ESG) scorecard report, evaluating the practices of Iraqi banks. The report assesses the banks’ commitment to ESG principles, governance frameworks, disclosure, transparency, and control environment.

Governance Framework and Commitment

The CBI assessed six key areas:

  • Governance framework: The bank’s overall structure and decision-making processes.
  • Board structure and composition: The makeup of the board and its committees.
  • Commitment to ESG practices: The bank’s policies and procedures related to environmental, social, and governance issues.
  • Role of shareholders and stakeholders: How the bank engages with its investors and other interested parties.
  • Control environment: The bank’s internal controls and risk management systems.
  • Disclosure and transparency: The level of information provided to stakeholders about the bank’s activities.

The report found that Iraqi banks have made significant progress in improving their ESG practices, with 18 out of the 98 questions answered correctly.

Bank Scores

The report categorized banks into four groups based on their scores:

  • Leaders (scores above 70%): These banks are considered to be leaders in ESG practices and will need to review and develop their practices further.
  • Good (scores between 61% and 70%): Banks that score well, but may still have areas for improvement.
  • Fair (scores between 51% and 60%): Banks that require more attention to improve their ESG practices.
  • Basic (scores below 50%): Banks that need significant improvement in their ESG practices.

International Comparison

The report noted that the European Commission, Council, and Parliament have reached a provisional agreement on the Corporate Sustainability Reporting Directive, which will apply to large companies and listed SMEs from January 2024. This development highlights the rapid evolution of ESG practices globally.

Data Analysis

The CBI’s scorecard team reviewed the data provided by the banks, cross-checking files for reliability, completeness, consistency, and comparability. Two international independent ESG expert assessors supported the CBI in this project.

Informed Discussions Ahead

While individual bank scores will not be published, the report is expected to lead to informed discussions between the CBI and each bank on how to improve their ESG practices. The scorecard aims to promote a culture of transparency, accountability, and sustainability within Iraqi banks.

A New Era for ESG in Iraq

The release of this report marks a significant milestone in promoting ESG practices among Iraqi banks. As the global financial landscape continues to evolve, it is essential that local institutions adapt to these changes and prioritize sustainability. The CBI’s ESG scorecard report serves as a catalyst for this transformation.