Management of Environmental and Social Risks Within Sustainable Project Finance: Solving Tensions to Enable Sustainable Development

Abstract

This paper examines the management of environmental and social (E&S) risks within sustainable project finance. To approach this matter scientifically, a qualitative interview approach has been conducted predominantly with experts from the engaged parties of banks and project companies as part of this research. The corresponding analysis reveals that both parties use the standards for sustainability reasons and as a tool for their risk management. Moreover, growing political pressure justifies an accelerated standards application. In line with the literature, it can be confirmed that E&S standards are also introduced for reputational reasons. However, in contrast to previous findings, the relationship is perceived by the respective parties as a trusting partnership. In addition to current knowledge, there is slight disagreement over the social requirements of banks, challenging its practicability.