The generalized sustainability credit rating system

Abstract

This article describes the steps required to generalize a sustainability credit rating system based on the analytical hierarchy process. We argue that such systems are ideal for commercial banks to improve their lending processes. Starting with the model by Zeidan et al. (2015), we transform the SCSS from a closed to an open platform by adding country and industry variables, two additional possible answers, and an explicit way to generate forward default probabilities. Finally, we illustrate the final report that could be used for similar models to help make banks greener. The final reports are generated after initial tests on a database of 100+ public companies, with over 1,000+ Monte Carlo simulations conducted in six months following the initial assessments.