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| Environmental Risk and Lending
Practices |
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Projects
Underwriting
Environmental Risk
Incorporating Environmenal Concerns in
Lending Practices
Principal Investigators
MIT:
T.Riddiough, H.Pollakowsky, L.Bacow
ETH: R.Scholz, O.Weber
UT:
T.Iwami
TARU (New Dehli, India): A.Revi, R.Roy,
V.Nangia
Cleveland State Univ.: A.Simons
Wise investors
profit by taking prudent risks. Increasingly, one of the risks firms
(and investors) are exposed to is environmental risk. This risk may
take many forms including the potential for increasing costs due to
stricter governmental regulation of the by-products of production,
disruption in the availability of key factor inputs due to materials
scarcity or regulatory fiat etc. While firms and investors are far
more aware of environmental risks today than they were ten years
ago, no systematic methodology exists today to guide investors in
underwriting environmental risk.
Goals/Objectives
Project 1: "Underwriting
Environmental Risk"
To understand how lenders and other
investors underwrite or evaluate environmental risk. In addition to
producing a series of cases, the goal of the project is to better
understand how principles of sustainability might be incorporated
into the routing processes of investment analysis.
Project 2:
"Incorporating Environmental Concerns in Lending Practices"
To
understand how environmental consideration influences lending
practices by financial institutions. The focus lies on investment
decisions concerning companies, projects and real estates. In
addition to case studies, the goal is to better understand how
principles of sustainability might be incorporated into the routine
of lending processes to reach an advantage for the environment and
the competitiveness of lending institutions.
Results/Findings
Banks very seldom use
quantitative indicators to measure the environmental risks of their
debtors.
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