Environmental risk rating for the financial sector

Environmental risk is difficult to measure due to uncertainties in its extent, timing and the definition of terms. This has led to the need for environmental risk quantification tools as an aid in a managerʹs decision making process. Environmental risk rating (ERR) should give a reliable and predictive link between environmental and financial performance. The rating could then be used by the financial sector to set terms and pricing of products, by discriminating between companies’ environmental performance. This paper considers some of the issues in the development of ERR and its benefit for the financial community as well as the environment.