Page 42 - Banking Finance November 2025

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A R T IC L E
promote ethical leadership at all management levels. HR
policies should emphasize accountability, ethical decision-
making, and avoidance of conflicts of interest. Senior lead-
ers can be regularly evaluated based on their adherence
to ESG principles and governance ethics.

Training on Governance:

Banks can introduce mandatory leadership develop-
ment programs that focus on ESG governance, risk
management, and ethical decision-making. These programs
can align managerial behaviour with the bank's vision
for ethical business conduct and long-term stakeholder
value.

Attraction of Talent: ESG integration also plays a
The Role of ESG in Shaping HR Policies significant role in attracting top talent. Young profes-
In recent years, there has been a growing recognition of sionals, particularly millennials and Gen Z, are increas-
the role HR plays in driving ESG initiatives. According to PwC ingly prioritizing work environments that align with
India's ESG report (2023), 85% of Indian banks reported that their values, including sustainability and ethical gover-
HR departments were involved in the creation and execu- nance.
tion of ESG strategies. Banks are increasingly viewing HR
not just as a support function but as a critical enabler of Challenges and the Road Ahead
ESG integration.
While ESG integration is crucial for India's banking sector,
it is not without challenges. Banks face issues related to
Aligning ESG with HR Strategies: inconsistent ESG reporting standards, lack of comprehen-
Performance Appraisals: Banks can include ESG sive data on social impact, and the need for upskilling HR
metrics in employee performance evaluations. Employ- professionals to manage ESG initiatives effectively.
ees may be assessed not only on financial performance
but also on contributions to sustainability, customer sat- However, the future of ESG in HR within Indian banks ap-
isfaction, and ethical behaviour. pears promising. As regulations evolve and global demand
for sustainable business practices rises, the banking sector
ESG Metrics for Rewards: A performance-based re-
will likely continue to push for more innovative and holistic
ward system aligned with ESG achievements can be
integration of ESG principles.
implemented. Employees contributing to environmen-
tal or social goals can be rewarded through recogni-
tion programs, promotions, or financial incentives. Conclusion
The integration of ESG principles into Human Resources
Long-Term Impact of ESG Integration in within Indian banks is reshaping the industry's approach to
sustainability, governance, and employee engagement.
HR: Banks are not only focusing on their environmental foot-
Increased Employee Engagement: According to a re- print but also enhancing social equity and ethical gover-
port by McKinsey & Company (2023), ESG-focused HR nance.
policies result in higher employee satisfaction, reten-
tion rates, and increased productivity. Employees who As India's financial sector continues to evolve, HR will play
believe their organizations are committed to ethical an essential role in driving these changes, ensuring that
and sustainable practices are more likely to stay and banks remain competitive, responsible, and aligned with
contribute to the bank's success. both national and global sustainability objectives.

38 | 2025 | NOVEMBER | BANKING FINANCE