31 MANAGING OUR KEY ESG RISKS GOOD GOVERNANCE SUSTAINABLE ECONOMIC GROWTH ENVIRONMENTAL STEWARDSHIP EMPOWERING PEOPLE AND COMMUNITIES APPENDIX Climate Change Risk Management Strategy and Risk Appetite The Group’s climate risk management strategy aims to support both the Group and its clients in transitioning towards managing climate risks and embracing a low-carbon economy. Strategy and Risk Appetite Our Future Plans Product Offering/ Incentive To continuously develop new products, as well as incentives that promote or support green and transitioning economic activities. Portfolio Target/ Reduction Plan Target To ensure that the Group takes initiatives to establish appropriate targets for reducing and managing climate risk with its lending and investment. Watchlist - High Climate Change Risk Sectors To deploy a negative screening approach based on environmental risk profiling and classification to identify ‘negative’ industries/ sectors/ companies exposed to high climate risk. These highrisk sectors will be included in a watchlist as a guidance to facilitate credit approving process and decision-making on investment or lending activities. Watchlist sectors that were identified includes power producers, oil and gas, metals, logging, chemical, palm oil, and cement. Climate Change Risk Assessment Checklist (“Climate Change RAC”) The Climate Change RAC, which was incorporated as part of the CCRM Framework has been enhanced and updated with reference to the guiding principles stated in BNM CCPT, as well as industry best practices to support the classification assessment during the inception of new investments and upon performing annual review. It aims to facilitate Business Units to determine the materiality of “significant harm to the environment” and effectiveness of “remedial measures” by providing guidance or relevant references, wherever appropriate/ available, for their assessment. Evaluate a transaction’s climate change impact, remedial efforts and attach a rating. The rating system provides insights into the climate risk profile of a transaction, facilitating the Bank in establishing risk appetite, making business decisions, implementing risk management processes and meeting monitoring, as well as reporting requirements. Conduct due diligence to assess ESG practices of potential customer. Objectives MANAGING OUR KEY ESG RISKS We aim to further identify specific climate-related risks and opportunities relevant to our business operations for each time horizon (short, medium and long-term) through scenario analysis, which will include a climate risk exposure analysis. The outcome of the analysis will be incorporated into relevant business practices. Moving Forward As of 31 December 2023, our private equity investments, corporate loans and bonds in the climate supporting category (Category 1) totalled RM71.3 million, while those in the climate transitioning Categories 2 and 3, totalled RM44.1 million and RM704.7 million, respectively. There were no financing/ investments in the watchlist Categories 4 and 5.
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