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ESG Scorecard Report Highlights Iraqi Banks’ Governance Practices

Introduction

The Central Bank of Iraq (CBI) has released its ESG Scorecard Report, assessing the environmental, social, and governance practices of Iraqi banks. The report highlights the strengths and weaknesses of each bank, grouping them into four categories: Leaders, Good, Fair, and Basic.

Methodology

The scorecard evaluated various aspects of bank practices, including:

• Governance framework and commitment
• Board structure and composition
• Control environment
• Disclosure and transparency
• Commitment to ESG practices
• Role of shareholders and stakeholders

Iraqi Islamic banks applying Shari’a Law responded to additional questions related to their specific duties under Article 10 of the Code.

A total of 98 questions were asked across six categories, with each question worth a maximum of two points. Points were allocated based on the CBI’s scheme.

Report Highlights

The report identifies Iraqi Bank Leaders, scoring above 70%, as being among the best in terms of ESG policies and practices. However, even these leaders will need to review and develop their ESG practices further, as the field is rapidly evolving.

Some notable recent developments include:

• The European Commission’s provisional agreement on the Corporate Sustainability Reporting Directive (CSRD), which will apply to large companies and listed SMEs from January 2024.
• The CBI’s ESG Scorecard Report provides a valuable tool for banks to assess their performance and identify areas for improvement.

Future Steps

The report is expected to lead to informed discussions between the CBI and each bank on how to enhance their ESG practices. The data provided by the banks was audited by the scorecard team at the Central Bank of Iraq and cross-checked to ensure reliability, completeness, consistency, and comparability.

Conclusion

The CBI’s ESG Scorecard Report is a step towards promoting sustainable banking practices in Iraq.