26 27 Environmental Stewardship About This Report Who We Are Progressing Towards A Sustainable Future Managing Our Sustainability Risks Good Governance Sustainable Economic Growth KENANGA INVESTMENT BANK BERHAD Sustainability Report 2022 Awards and Recognitions Empowering People and Communities GRI Content Index ESG Performance Data MANAGING OUR SUSTAINABILITY RISKS We recognise the impacts of climate change as a non-diversifiable risk to Kenanga’s business activities and financial operations. In 2021, we established the Group’s CCRM Framework, which is aligned with the BNM’s CCPT. The CCRM Framework is designed to support the Group in implementing a structured approach for assessing and classifying climate change risk associated with our lending, financing and investment activities. In 2022, we integrated the CCRM Framework to strengthen our climate risk management strategy and business planning. To build on this, we have further aligned our policy and practice by incorporating the new guidelines introduced by BNM in November 2022, including the Climate Risk Management and Scenario Analysis (“CRMSA”) and JC3’s TCFD Application Guide for Malaysian Financial Institutions issued in June 2022 into the Group’s business strategies and enterprise risk management framework. The implementation of these guidelines will be completed in phases and it is in line with regulatory timelines by the end of 2024. MANAGING OUR SUSTAINABILITY RISKS Climate Change Risk Management Strategy and Risk Appetite The Group’s climate change risk management strategy is meant to assist the Group in mitigating climate risks and to steer businesses towards managing climate change risks while supporting the global transition towards a low-carbon economy. Climate Change Risk Assessment Criteria (“Climate Change RAC”) The Climate Change RAC was developed as part of the CCRM Framework in 2021 with reference to the guiding principles stated in BNM’s CCPT, and by referencing industry best practices to support the classification assessment. The Climate Change RAC shall assist Business Units to determine the materiality of ‘significant harm to the environment’ and effectiveness of ‘remedial measure’ by incorporating definitive value or benchmark wherever appropriate for their assessment. In addition to the CCRM Framework which primarily focuses on the environmental components under ESG considerations, the businesses are also encouraged to put equitable emphasis on the other two (2) components of ESG including Social and Governance in lending or financing and investment activities. Lending, financing and investment that are implicated with serious social and governance issues such as exploitation of labour, corruption and criminal activities involvement shall be avoided. THE FRAMEWORK AIMS TO Inculcate awareness amongst our stakeholders on the pertinence of understanding climate risks as well as ensuring they stay abreast of Kenanga’s climate ambitions Provide an overview of how climate change impacts our business, clients and the broader economy Facilitate the integration of climate change considerations into our existing risk management practices and business activities Identify and formulate appropriate climate-related strategies, feasible risk appetites and targets to improve our readiness towards climate risk management Introduce a structured classification methodology to assess and classify our financing and investment activities to ensure they are aligned with the transition to a low-carbon economy Establish the necessary guiding principles to support our financing and investment activities, ensuring they consider climate risks Develop appropriate reporting standards for our climate risk management disclosure for internal and external stakeholders Overview of Climate Change Risk Management Framework In line with Kenanga’s commitment to adopting a more sustainable business strategy, the CCRM Framework plays an integral role in supporting the Group as it embarks upon a phased approach towards recognising and addressing climate change risks and opportunities. OBJECTIVES Evaluate a potential investment’s climate change impact and attaches a rating The rating system classifies whether the investment contributes to climate change mitigation efforts or is harmful to the environment Due diligence to assess general ESG practices of the potential investee company STRATEGY AND RISK APPETITE OUR FUTURE PLANS To allocate appropriate funds to support green economic activities To continuously develop new products as well as incentives that promote or support green and transitioning economic activities To ensure that the Group takes initiative to set appropriate targets to reduce and manage climate change risk from its financing and investment activities To identify and develop a watchlist for sectors that are exposed to high climate change risk as a guide to facilitate Business Units in its conduct of classification and risk assessments Fund Allocations for Sustainable Green Economic Activities Reduction Targets Watchlist - High Climate Change Risk Sectors Product Offering and Incentives “In our efforts to be a sustainable and responsible financier, the implementation of the CCRM Framework will integrate climate risk analysis into our decisionmaking process, where we aim to have a financing portfolio that considers the climate change impact to the environment. We intend to raise awareness and work with our clients to incorporate sustainability measures in their business undertakings.” WOO KING HUAT Chief Credit Officer, Kenanga Investment Bank Berhad
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