Sustainability Report 2021

57 Introduction Customers Social Governance Appendix Environment Sustainability Report 2021 Climate Change Undoubtedly, climate change will materially impact the earth’s natural environment and trigger adverse impacts on societies and economies across the globe. Climate change has become one of the key agendas of governments, authorities, and international organizations. An increasing number of climate change-related requirements, assessments, and disclosures havebeenpromoted, and to some extent enforced, by these parties to mitigate climate change impacts. Proactive climate risk management is also essential in this regard, which will allow banks to identify and respond to risks in a timely manner. Failing to adopt such practicewill put banksat risk for indirect financial andnon-financial threats. Generally, banks have been under public scrutiny and are held accountable for negative impacts on the environment and society caused by business borrowers. Financing irresponsible borrowers will not only be a significant source of immediate reputational risk but will also undermine the Bank’s long-term sustainability in both asset value and profitability. Likewise, banks play an integral part in addressing climate change issues and facilitating the transition to a low-carbon economy through financial products and services. Pandemic The COVID-19 pandemic could potentially be observed as an isolated incident; however, evidence shows that there has been an increase in both the number and diversity of epidemic events over the past few decades. These events can create short-term and long-term threats towards economic and societal well-being. Measures taken to contain these events could bring about an economic downturn, induce political instability, and prolong existing, severe economic recession. • The Bank implements the Environmental and Social Responsibility (ESR) policy that outlines framework and requirements for managing environmental and social risks in commercial lending. • The Bank is in the process of conducting climate risk assessment and scenario analysis. The Bank plans to apply TCFD framework by 2024. • The Bank commits to stop financing any new coal-fired power plant projects, activities related to coal mining and exploration projects, oi l sands, and commercial logging operations in primary tropical forest, as stated in the Exclusion List of the ESR Policy. • The Bank continues to deliver environmentally responsible products such as green loans, sustainability-linked loans, and green bonds. • The Bank explores and collaborates with green and sustainable businesses to increase the Bank’s green lending portfolio and assist customers through their green/sustainability transition. • The Bank continues to assist customers in need while navigating moral hazards and managing the overall asset quality of the Bank. • Prior to the pandemic, the Bank’s risk management framework was already well-positioned to deal with a wide variety of business risks as well as ensure business continuity. • In 2021, the Bank has taken steps to improve the management of non-financial risks with predefined risk appetite. We perform regular monitoring and report to appropriated committees in order to ensure sufficient attention, care and action taken. • The Bank maintains strong liquidity and capital tomaintain normal operations and to absorb volatility of unexpected events in the near term. For more information on risk management and governance, see One Report 2021. Context of Emerging Risks Impact and Mitigation