Abstract:

Purpose – The purpose of this research is to create the complex approach for assessment of social and environmental risks which includes additional phases of lending process for examining social and environmental issues and model for assessment of social and environmental risks. 

Design/methodology/approach – In order to achieve the aim of this research, the authors made qualitative analysis of: 1) scientific literature in the area of social and environmental risk assessment; 2) good practice of several banks in Europe; and 3) information about the three Latvian commercial banks publicly available from their home pages and banks’ internal documentation and procedures.

Findings – The authors came to a conclusion that local banks in Latvia, which realize procedure of social and environmental risks assessment, do it formally and after the lending decision is taken no further monitoring is performed, thus exposing the image and reputation of the bank to the social and environmental risks. But the international banks with the branches in other countries strictly monitoring both risks. So in local banks therefore it is even more important to determine lending criterions according to the issues of social and environmental risks and implement further monitoring of risk until the termination of lending agreement.

Research limitations/implications Limitedness of publicly available information about procedures of social and environmental risk assessment in local banks.

Originality/value –The lending assessment approach developed by the authors will take an important part in lending decision making process in local bank.