ESG Data Requirements for Loan Underwriting: A Banker’s Checklist

Whether you are a regional bank, a cooperative lender, or the credit arm of a larger financial group, sustainability information now plays a central role in assessing SME borrowers. Some SMEs report directly under CSRD; others use the voluntary VSME Standard; most simply provide data when banks ask for it. Either way, your underwriting process increasingly relies on consistent ESG information to understand risk, meet regulatory expectations, and support clients on their transition journey.

For banks, the challenge is not complexity — it is consistency. A simple, structured ESG data checklist helps credit teams gather the same information every time, compare borrowers effectively, and document alignment with the bank’s risk framework. This guide outlines the core ESG data points, the reasoning behind them, and a practical template you can share directly with SME clients.

If your institution also evaluates suppliers or internal value-chain sustainability, you may find it useful to review the broader guide on CSRD Supplier Requirements.

1. Why ESG Data Matters in SME Loan Underwriting

1.1 ESG is now part of credit risk

Environmental and social issues increasingly influence financial performance: energy costs, flood risk, worker safety, governance failures, supply-chain instability, and regulatory exposure. These topics are now recognised components of prudent credit assessment.

1.2 CSRD value-chain requirements create upstream expectations

Large corporate borrowers reporting under CSRD need sustainability data from their value-chain partners. Banks operate in a similar position: they query clients for ESG information because regulators, investors, and internal risk frameworks expect it.

If your SME clients are unsure why you’re asking for data, sending them to the VSME overview can help: The VSME Basic Module Explained.

1.3 ESG data supports portfolio-level reporting

Banks increasingly disclose climate and social risks across their lending books. High-quality borrower data strengthens:

• Stress testing
• Portfolio segmentation
• Green asset ratios
• Transition risk mapping

2. Core ESG Categories to Collect from SME Borrowers

This checklist uses straightforward categories that align with CSRD, VSME, and the types of questions banks typically ask during underwriting.

2.1 Environmental data

Minimum dataset:

• Total annual energy consumption (electricity, heating)
• Energy sources (renewable vs non-renewable)
• Scope 1 and Scope 2 greenhouse gas emissions (or estimates)
• Waste volumes and disposal channels
• Water usage (where material)

These metrics are standard across ESRS and VSME. They also support early-stage transition assessments. Banks frequently use them to evaluate:

• Exposure to carbon cost volatility
• Ability to meet sustainability-linked loan KPIs
• CapEx needs for energy efficiency

If clients need support calculating emissions, you may direct them to accessible guidance such as Emission Factor Selection.

2.2 Social data

Minimum dataset:

• Headcount and employment type
• Health and safety incident rates
• Training practices
• Policies for equality, diversity and inclusion
• Supply-chain practices and human rights checks (if relevant)

For sectors with labour-intensive operations, social indicators are closely tied to continuity of operations and reputational risk.

2.3 Governance and business conduct

Minimum dataset:

• Existence of a Code of Conduct
• Roles and responsibilities for sustainability oversight
• Anti-corruption safeguards and whistleblower channels
• Evidence of board or senior leadership involvement in risk topics

Business conduct topics form part of most credit-due-diligence processes. They also underpin sustainability-linked loan covenants.

You can explore this in more depth on the Business Conduct topic hub.

2.4 Sector-specific risk indicators

Banks often request additional data depending on SME activity:

• Manufacturing: material use, hazardous waste, circularity metrics
• Transport: fuel consumption, fleet efficiency
• Real estate: building energy classes, renovation needs
• Agriculture: land use, soil and water impacts

Relevant examples for SMEs across sectors appear in the EU-wide guide: CSRD for SMEs: The Complete 2025 Guide.

3. A Practical ESG Questionnaire Template for Borrowers

This template is intentionally simple so SMEs without consultants can complete it confidently.

Section A — General Information

1. Company name, location, NACE code
2. Number of employees (headcount or FTE)
3. Description of main activities and significant sites
4. Existing sustainability certifications (optional)

Section B — Environmental Metrics

1. Annual electricity consumption (MWh)
2. Heating or fuel consumption (MWh or litres)
3. Scope 1 and Scope 2 emissions (or confirmation that estimates will be provided)
4. Total annual waste (hazardous and non-hazardous)
5. Water withdrawal and consumption (only if material)

Section C — Social Indicators

1. Total workforce and breakdown by permanent/temporary
2. Number of workplace incidents in past 12 months
3. Policies covering equality, training, and worker well-being
4. Supply-chain checks for human rights or ESG risks

Section D — Governance and Business Conduct

1. Existence of a Code of Conduct
2. Anti-corruption policies or training
3. How risk oversight is structured within leadership
4. Whether sustainability performance is monitored internally

Section E — Transition Plans (Optional for SMEs)

1. Planned energy efficiency improvements
2. Upcoming capital investments related to sustainability
3. Targets to reduce emissions, waste, or resource use

This mirrors the architecture of simplified disclosure frameworks such as VSME, helping SMEs progressively prepare for future requirements.

4. Assessing ESG Data During Underwriting

4.1 Identify “red flags” early

Banks commonly flag:

• High energy intensity without a transition plan
• Frequent safety incidents
• Lack of governance policies
• Weak disclosure on high-impact processes
• Dependence on volatile or high-carbon supply chains

These signals help credit teams evaluate resilience over the loan term.

4.2 Evaluate alignment with CSRD value-chain expectations

Even if SMEs are not in scope, banks may still assess them against CSRD-aligned principles:

• Transparency on impacts
• Processes for identifying environmental and social risks
• Plans to reduce negative impacts
• Clarity on governance roles

This creates consistency across portfolio-wide reporting.

4.3 Use ESG information to support relationship building

Borrowers often assume ESG data requests are “tick-box exercises”. In practice, the data helps banks:

• Recommend suitable financing instruments (e.g., energy efficiency loans)
• Offer sustainability-linked pricing benefits
• Direct SMEs to local support schemes
• Create a shared roadmap for risk reduction

This is also part of broader stakeholder engagement, reflected in your selection of the stakeholder-engagement topic.

5. How to Integrate ESG into Underwriting Workflows

Step 1 — Standardise your data collection

Create a unified ESG questionnaire for all SME borrowers. Keep fewer than 20 core questions so SMEs can respond confidently.

Step 2 — Train credit officers

Provide basic training on:

• Reading GHG data
• Understanding business conduct risks
• Identifying transition opportunities
• Asking follow-up questions based on sector risks

Step 3 — Build a centralised data repository

Even a spreadsheet works initially. Record:

• ESG metrics
• Missing data
• Data quality labels (reported vs estimated)
• Notes from credit calls

Step 4 — Connect ESG insights to credit decisioning

Use ESG assessments to support:

• Pricing
• Loan tenor decisions
• Collateral expectations
• Covenant design
• Monitoring plans

Step 5 — Engage borrowers across the lifecycle

Your ongoing relationships become more efficient when ESG conversations start at underwriting. Many SMEs appreciate clarity early rather than receiving follow-up requests later.

For a broader perspective on value-chain expectations and data needs, see Data Collection & Management.

Frequently Asked Questions

What ESG information should banks prioritise when lending to SMEs?

Focus on a core set of environmental, social, and governance indicators: energy consumption, emissions (or estimates), health and safety, and business conduct policies. These form the basis for risk assessment and align well with simplified frameworks such as VSME. For SMEs uncertain about where to begin, the overview in CSRD for SMEs: The Complete 2025 Guide can help.

How can banks handle SMEs that don’t have emissions data?

Use estimates based on sector emission factors and clearly label them as such. Encourage SMEs to improve data quality over time. For accessible guidance, you can reference the Emission Factor Selection Guide.

Do banks need CSRD-level reporting from SMEs?

Not necessarily. Banks usually require a proportionate dataset that aligns with CSRD principles but does not replicate the full ESRS. Many banks use VSME-style questionnaires to keep things achievable. These approaches are increasingly consistent with broader value-chain expectations, as discussed in CSRD Supplier Requirements.

How often should ESG data be updated for loan monitoring?

Annually is common, with more frequent updates for high-impact sectors or sustainability-linked loans. Banks typically integrate ESG reviews into their standard credit monitoring cycle.

Key Terms

• ESG: Environmental, Social, and Governance topics used to assess risk and behaviour.
• CSRD: EU sustainability reporting directive that influences value-chain expectations.
• VSME: Voluntary sustainability standard for SMEs.
• Scope 1 & 2: Direct and energy-related emissions from operations.
• Stakeholder Engagement: Continuous dialogue with borrowers to improve sustainability practices.

Conclusion

For banks, ESG data collection is no longer peripheral — it is part of robust risk management and client engagement. A clear, proportionate questionnaire helps credit teams gather reliable information, and a consistent underwriting process supports regulatory expectations without overwhelming SMEs. With structure and steady improvement, ESG integration strengthens both financial resilience and borrower relationships.