Kiev, December 2021
WORLD BANK
GREEN FINANCE
- December 2021 -
Our understanding
Sustainable
Finance Roadmap
✓ The NBU has approved a Sustainable
Finance Roadmap, with specific actions
that will need to be taken from 2021 to
2025 in order to promote:
a. Sustainable finance
b. Environmental awareness
c. Mobilizing private resources to
sustainable finance activities
Mobilization of
resources
✓ The NBU Policy / Roadmap (“National
Economic Strategy”) seeks to contribute to
the mobilization of resources to reach the
estimated €102 bn in 2030 to enable
meeting the commitments by Ukraine to
contribute to the 2015 Paris Agreement
(i.e., reduce greenhouse gas emissions to
<35% compared to those from 1990)
Regulation
✓ The Policy(1) is based on European and
international standards and contains several
actions, among others:
a. Use of the European Commission's
based taxonomies for sustainable
activities
b. Mandatory disclosure for banks and
other non-bank financial institutions
(NBFIs (2 ))
c. Standards for corporate governance for
banks and other NBFIs:
➢ Banking supervision
➢ Financial stability
d. Issuance of risk management
standards for banks and other NBFIs
e. Continuous capacity-building activities
WORLD BANK - GREEN FINANCE
(1) Law of Ukraine “On the Basic Principles (Strategy) of the State Environmental Policy of Ukraine for the period up to 2030”; (2) Under supervision of the NBU since July 1, 2020
2
How the World Bank through FinSAC can help to implement the strategy
1. Implementation of a SREP methodology and operating
procedure
01
➢ The World Bank’s FinSAC, as it is well known by the NBU,
is a Vienna-based Financial Centre, that aims to provide
TA to client countries, mainly in Eastern and SouthEastern Europe on:
✓ Banking prudential regulation and supervision
✓ Banking resolution and crisis management
✓ Financial Stability / macroprudential
2. Benchmarks and assessments of supervisory models
3. Development of tools to assess:
✓ Business model viability and sustainability
✓ Capital assessments
4. Approaches / development tool for IFRS-9-based
provisions
5. Implementation / assessment tools for ICAAP & ILAAP
02
➢ WB’s FinSAC has been supporting client countries
(mainly Central Banks / banking supervisors) in a number
of areas:
6. Implementation / assessment tools for Recovery
Planning
7. Operationalization of resolution units / resolution plans
8. Microprudential bottom-up stress testing exercises
1. TA on Financial Stability function within NBU
03
➢ In recent years, the WB has provided TA to the NBU on
regulatory and prudential aspects:
2. Introduction of Regulatory Capital Buffers
3. Support in the introduction of the CRR/B3
regulatory framework
4. Participation in the SREP supervisory process
In this context, the World Bank’s FinSAC is focusing on developing a regulatory and supervisory approach to
risks stemming from climate change
WORLD BANK - GREEN FINANCE
3
Specific regulatory actions to assess and stress the
risks from climate change
Integration of sustainability in the supervisory
framework
Annex
WORLD BANK - GREEN FINANCE
4
Specific regulatory actions to assess and stress the risks from climate change
Overview
01
1st stage
➢
Risk Assessment Exercises
➢
Survey / questionaries to the banking sector
Capacity building
2nd stage
02
➢
Preparation of a Regulation / guidelines on management
environmental risks
➢
Request for strategic plans for assessing climate risks
Risk analysis
3rd stage
03
04
05
➢
Update of the supervisory methodologies to assess climate risks
➢
Development of specific tools for assessing climate change risks
➢
On-site activities for assessing climate change
On-site activities
4th stage
➢
Pillar 3 reporting requirements for banks
➢
Climate change stress testing
Off-site monitoring
5th stage
➢
Setting capital requirements for climate change risks
WORLD BANK - GREEN FINANCE
5
Specific regulatory actions to assess and stress the risks from climate change
Description of the different stages (1 of 3)
Content
Timeframe
Relevance
Main goal
Examples
Risk Assessment
Exercises
➢ Templates defined by the supervisor
and completed and submitted by
banks
➢ Commonly, they may include:
o Sectorization of the NFC (by
NACE)
o Breakdown of the loan
portfolio by physical location
Early
High
➢ First understanding of the exposure
of the banking sector to climate
change risks
Several
Survey / questionaries to
the banking sector
➢ Focused on aspects related to how
the climate change risks are
embedded in the business model,
governance practices, disclosure
and risk management
Early
(previously to a
Regulation)
High
➢ Gaining a better understanding of
the exposure of the banking sector to
climate change
Several
Preparation of a Regulation
/ guidelines on
management
environmental risks
➢ Expectations for the banks on:
a) Business Model
b) Governance and Risk Appetite
c) Internal Control Functions
d) Disclosure
e) Risk Management
Medium-term
Very High
➢ Classifying the standards that
banks will be expected to meet for
management of climate finance
➢ Basis for further supervision actions
Request for strategic plans
to address the guidelines /
Regulations
➢ Signed-off by Board of Directors
➢ Short, medium and long-term actions
to address the shortcomings
Medium-term
1st stage
1
2
2nd stage
3
ECB
PRA
4
WORLD BANK - GREEN FINANCE
NFC: Non-Financial Corporations
High
➢ Banks identifying their gaps and
commitments to address them
ECB,
PRA
6
Specific regulatory actions to assess and stress the risks from climate change
Description of the different stages (2 of 3)
Content
Timeframe
Relevance
Main goal
Examples
Medium-term
Very High
➢ Embedding the assessment of the
risks to climate change in the
supervisory framework
EBA,
ECB
➢ Facilitating / homogenizing and
automating the risk stemming from
climate change
–
5
3rd stage
Update of the supervisory
methodologies to include
climate risks
➢
➢
➢
➢
SREP updates
ICAAP assessment
Business Plan Assessments
Recovery Plan Assessment
6
Development of specific
tools for assessing climate
change risks
➢ Tools for business model analysis
➢ Tools for credit risk analysis
Early
(previously to a
Regulation)
Medium
On-site activities for
assessing climate change
➢ Specific methodologies for on-site
inspections
Medium-term
High
➢ -
ECB
(TBD)
EBA,
OCDE
7
4th stage
8
Pillar 3 reporting
requirements for banks
➢ Standardized templates
➢ Quantitative and qualitative
information
Long-term
High
➢ Exposing banks to market discipline
Climate change stress
testing
➢ Definition of scenarios (physical and
transition risks)
➢ Assessing solvency and / or liquidity
in stress test
Long-term
Medium
➢ Enhancing the understanding of the
exposure of banks to the climate
change risk
9
WORLD BANK - GREEN FINANCE
ECB
BoE
7
Specific regulatory actions to assess and stress the risks from climate change
Description of the different stages (3 of 3)
Content
Timeframe
Relevance
Main goal
Examples
Long-term
Very High
➢ Ensuring the proper coverage of the
climate change risks into the bank’s
capital position
MKB
5th stage
10
Setting capital
requirements for climate
change risks
➢ Specific P2R
➢ Pillar 1 requirements
WORLD BANK - GREEN FINANCE
8
Specific regulatory actions to assess and stress the
risks from climate change
Integration of sustainability in the supervisory
framework
Annex
WORLD BANK - GREEN FINANCE
9
Integration of sustainability in the supervisory framework
Methodologies
Contents
Assessment of the bank’s Business Model
Assessment of the bank’s internal governance and risk management
Assessment of the credit, market and operational risks
Funding and Liquidity Risks Assessment
Integration in the SREP
supervisory framework /
SREP ratings
✓
✓
✓
✓
Integration in the ICAAP
requirements
✓ Assessment methodologies to consider the sustainability risks:
❖ Risk identification & assessment
❖ Internal stress testing
❖ Internal / economic capital requirements
Assessment of the
bank’s Business Plans
✓ Business model tool / templates to be adopted to:
✓ Lengthen the time horizon of the projections
✓ Break-down by sectors / revenues
✓ Criteria to assess the exposure to sustainability risks
Assessment of the
bank’s Recovery Plans
✓ Extreme, but plausible stress test / recovery scenarios to be considered
✓ Recovery optics to assess their impact on the sustainability
Assessment of the
bank’s operational
continuity
✓ Inclusion of physical risk scenarios
✓ Procedures to consider the exposure to climate risks
WORLD BANK - GREEN FINANCE
10
Specific regulatory actions to assess and stress the
risks from climate change
Integration of sustainability in the supervisory
framework
Annex
Integration in credit risk management
Climate change risks stress testing
across Europe
Pillar 3 Climate disclosure
WORLD BANK - GREEN FINANCE
11
Integration in credit risk management
Credit risk granting phase
Corporate portfolio
Residential mortgage
Car lending portfolio
Other consumer loans
(i.e., credit cards)
1
Specific products
➢ Green projects (i.e.,
taxonomies)
➢ Energy efficient CRE
➢ Energy efficient
mortgage loans
➢ Electric vehicle loans
➢ N/A
Sustainability Risk
Assessment
➢ Sustainability / ESG
Ratings
➢ Minimum criteria for
ESG to clients
➢ Calculations of “green
PDs” + “ordinary PDs”
➢ Label / certificate for the
building energy
efficiency
➢ Label / certificate of the
efficiency of the vehicle
➢ N/A
➢ Prices linked to “green
products”
➢ Prices linked to “green
PDs” or “green Ratings”
➢ Prices linked to “green
products”
➢ Prices linked to “green
products”
➢ N/A
2
1
Credit risk
underwriting
3
Loan / credit pricing
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CRE: Commercial Real Estate
12
Integration in credit risk management
Credit portfolio management
Corporate portfolio
1
Residential mortgage
Car lending portfolio
Other consumer loans
(i.e., credit cards)
➢ Sectoral basis
+
➢ Single name
+
➢ Physical
➢ Product-based / on
energy efficiency
➢ Product-based
➢ N/A
Asset Allocation
➢ An additional factor on
asset allocation
➢ Banks to target “Green
Asset Ratio”
➢ Product-based (targets
for new lending)
➢ Product-based (targets
for new lending)
➢ N/A
Credit concentration
limits Risk Appetite
➢ Limits for certain
sectors (stock / new
lending), i.e.:
o Coal finance
o Other high emission
activities
➢ N/A
➢ N/A
➢ N/A
Sustainability stress
testing
➢ -
➢ Physical Risks
➢ Sensitivity Analysis to
disorder transition
➢ -
➢ -
Green Assessment /
sectoral
2
2
Credit portfolio
management
3
4
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13
Integration in credit risk management
Credit classification & coverage & capital
Corporate portfolio
Residential mortgage
Car lending portfolio
Other consumer loans
(i.e., credit cards)
1
➢ Limited / no use
➢ Potential S2 based on
high exposure to risks
from climate change
➢ No use
➢ Potential S2 to residential
mortgage loans in
geographies exposed to
physical risks
➢ No use
➢ No use
Credit coverage
➢ Only through S2 and S3:
o S2 due to lifetime
PDs + LGDs
o S3 due to LGDs
➢ Limited use
➢ Enclose through LGD
➢ No use
➢ No use
Internal capital
➢ No use
➢ No use
➢ No use
➢ No use
Credit classification
(IFRS9)
2
Credit
3 classification &
coverage & capital
3
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14
Integration in credit risk management
Main problems faced by banks
Corporate portfolio
Lack of Data about
borrowers / exposure to
climate finance
Taxonomies
Lack of past
information / data
Methodologies for Risk
Assessment
➢ Corporates not required
to disclose information
➢ Lack of ESG / corporate
sustainability ratings
Residential mortgage
Car lending portfolio
Other consumer loans
(i.e., credit cards)
➢ Lack of regulations on
energy efficiency
➢ Lack of data for individual
borrowers
➢ Need to develop
regulations on the energy
efficiency of vehicles
➢ Lack of data for individual
borrowers
➢ Lack of data for individual
borrowers
➢ Incomplete / absence taxonomies to assess borrowers
➢ Risk related to climate finance have not materialized in the past
➢ Forward-looking information required
➢ Risks steaming from climate change likely to materialize in the longer term, beyond the materiality of the current loan portfolio
➢ Methodologies for translating climate change risks into the assessment of the borrower creditworthiness still unclear
WORLD BANK - GREEN FINANCE
15
Specific regulatory actions to assess and stress the
risks from climate change
Integration of sustainability in the supervisory
framework
Annex
Integration in credit risk management
Climate change risks stress testing
across Europe
Pillar 3 Climate disclosure
WORLD BANK - GREEN FINANCE
16
Climate change risks stress testing across Europe
Benchmarking: main features
Are firms
involved in the
exercise?
Yes
No
Yes
Yes
Physical /
Transition risk
Y/Y
N/Y
Y/Y
Y/Y
Time horizon
30 years
5 years
30 years
3 & 30 years
Static / dynamic
balance sheet
Static for first 5 years, then
reassessed every 5 years
Static
Static, with impact assessment
every 5 years
Static – 3 years; Dynamic – 30 years
(assessment in 2030/40/50)
Number of
scenarios
3 for transition risk and
1 for physical risk
4 for transition risk
2 for transition risk and
1 for physical risk
4 for transition risk and
2 for physical risk
Sectoral
breakdown
WIOD classification
NACE classification – 56 sectors
SIC codes
NACE classification – 22 sectors and other
industries aggregated
Target Variable
Asset side losses
(credit, counterparty credit and market risks)
Asset-side losses
Credit book impairments
Credit impairments, asset side losses
(market, operational) alongside potential
impacts arising from reputational issues
Output
breakdown
Geographical, sectoral, key counterparties
(top 15)
Range of losses in banks, insurers, pension
funds – CET1 impact for banks
Geographical, sectoral, key exposures
(top 100)
Geographical, sectoral, key counterparties
(top 20)
Reconciliation
exercise
Yes
No
Yes, in a separate qualitative
questionnaire
No
Communication
of results
BdF / ACPR disclose system-wide results
and providing feedback to individual firms
DNB published estimate of impact
(aggregate CET1 changes) on Dutch
financial sector
BoE discloses system-wide results and
providing feedback to individual firms
SSM will disclose aggregated results and
providing feedback to individual firms
Best practice (if applicable)
WORLD BANK - GREEN FINANCE
Sources: (i) extracted from BIS/FSI, “Stress-testing banks for climate change – a comparison of practices”, July 2021; (ii) internally elaborated from ECB’s Climate Stress Test Methodology, October 2021.
17
Climate change risks stress testing across Europe
The case of the ECB’s 2022 Climate Risk Stress Test (CRST)
Quality assurance process
✓ Joint learning exercise with pioneering characteristics, looking for enhancing the capacity of both banks and supervisors to assess climate risk
✓ Supervisor enhances its understanding of what climate-relevant data banks have available and the limitations when assessing climaterelated risks, to identify best practices and to ensure that banks follow the instructions
✓ Its intensity and granularity will be commensurate with the materiality of the issues identified
Module 1: Qualitative questionnaire
✓ Gain an illustrative overview of the institution’s internally available ST capability and capacity including its climate risk stress testing
framework, management and modelling practices
✓ The questions concern qualitative information on the institution’s current practices, i.e. based on the bank’s status quo
✓ 11 blocks, only one concerns the assumptions developed by the bank in the context of the 2022 CRST (no supporting documentation
in the first submission)
Module 2: Climate risk metrics
✓ Focused on 2 metrics that provide insights into the sensitivity of banks’ income to transition risk, their exposure to carbonintensive industries and, in that sense, the sustainability of the banks’ business model
✓ Metric 1: Interest, fee and commission income from greenhouse gas intensive industries
✓ Metric 2: Financed greenhouse gas emissions
Module 3: Bottom-up stress test projections
✓
✓
✓
✓
ECB identifies a subset of participating banks (all banks participating in the CRST are expected to submit starting point information)
The purpose is to describe the methodology and requirements for the starting point data and projections that banks must provide
ST targeting transition risk and physical risk, with a wide number of scenarios (credit & market risks depending on scenario)
ECB provides information regarding NACE sectors, EPC and flood risks are provided in those applicable scenarios
Annexes
✓ Module 1 questionnaire
✓ Sample of Banks subject to module 3 (i.e., bottom-up ST)
✓ Set for scenario variables
✓ List of industries grouped by NACE
WORLD BANK - GREEN FINANCE
EPC: Energy Performance Certificate
18
Climate change risks stress testing across Europe
2022 ECB climate risk stress test timeline
Final package +
workshop with banks
Industry
dialogue on
methodology
List of maps under
the scope of ST
projections
STAR portal
operation
December
2021
Preparation
Current status
Source: ECB Banking Supervision, 2021
Publication of
results
Submission of results to the
ECB & subsequent challenges
Finalization of methodology and templates
May 2021
First data
submission
February 2022
Execution
WORLD BANK - GREEN FINANCE
March 2022
July 2022
Q&A Phase
19
Climate change risks stress testing across Europe
Examples of the surveys / questionnaires
Materiality assessment
Question 0.1
Supervisory expectations relating to risk management
Chapter 6.1: Risk management framework
Does your institution have processes in place to identify and measure climate-related and environmental risks? Please indicate YES or NO.
NO
If YES, please describe these processes.
Institutions are expected to incorporate climate-related and environmental risks as drivers of existing risk categories into their risk management
framework, with a view to managing, monitoring and mitigating these over a sufficiently long-term horizon, and to review their arrangements on a
Supervisory expectations relating to business models and strategy regular basis. Institutions are expected to identify and quantify these risks within their overall process of ensuring capital adequacy.
If YES, please indicate what share of your institution's total balance sheet exposure is covered by these processes.
Expectation 7
If YES, please state which climate-related and environmental risk drivers listed below are covered by these processes. Please indicate YES or NO.
Chapter 4.1: Business environment
For transition risk
Question 3.1
Policy / regulation
Institutions are expected to understand the impact of climate-related and environmental risks on the business environment in which they operate, in
the short, medium and long term, in order to be able to make informed strategic and business decisions.
Question 1.1
Are your institution's practices aligned with this expectation?
Technology
Market sentiment
Are your institution's practices aligned with this expectation?
Expectation 1
Answer:
Answer:
Answer:
Other (please specify)
Instructions:
- Each answer is expected to be substantiated through the submission of formal documents detailing the respective policies, procedures and
operational arrangements with explicit reference to the scope of this expectation.
- Each answer is expected to
Instructions:
For physical risk
Droughts / extreme heat
be substantiated through the submission of formal documents detailing the respective policies, procedures and
operational arrangements with explicit reference to the scope of this expectation.
Supervisory expectations relating to governance and risk appetite
Floods / sea level rises
Chapter 5.1: Management body
Storms / hurricanes
Biodiversity loss / land use change
Expectation
Water stress 3
Other (please specify)
Question 2.1
Supervisory expectations relating to disclosures
The management body is expected to consider climate-related and environmental risks when developing the institution’s overall business strategy,
business objectives and risk management framework and to exercise effective oversight of climate-related and environmental risks.
Chapter 7: Disclosures
Are your institution's practices aligned with this expectation?
Expectation 13
Instructions:
- Each answer is expected to be substantiated through the submission of formal documents detailing the respective policies, procedures and
operational arrangements with explicit reference to the scope of this question.
Question 4.1
Answer:
Answer:
Instructions:
Instructions:
For the purposes of their regulatory disclosures, institutions are expected to publish meaningful information and key metrics on climate-related and
environmental risks that they deem to be material, with due regard to the Regulator's Guidelines on non-financial reporting: Supplement on reporting
climate-related information.
Are your institution's practices aligned with this expectation?
- Each answer is expected to be substantiated through the submission of formal documents detailing the respective policies, procedures and
operational arrangements with explicit reference to the scope of this expectation.
- Each answer is expected to be substantiated through the submission of formal documents detailing the respective policies, procedures and
operational arrangements with explicit reference to the scope of this expectation.
Surveys / questionnaires are intended to increase supervisors’ understanding banks’ exposure to climate change
risks
WORLD BANK - GREEN FINANCE
20
Specific regulatory actions to assess and stress the
risks from climate change
Integration of sustainability in the supervisory
framework
Annex
Integration in credit risk management
Climate change risks stress testing
across Europe
Pillar 3 Climate disclosure
WORLD BANK - GREEN FINANCE
21
Pillar 3 Climate disclosure
Increase in the level of disclosure
Existing semi-annual Pillar 3 disclosure
(62 templates 1S 2021)
11 quantitative templates (8 in 2022)
3 qualitative templates for 2022
1
Environmental, Social & Governance risk qualitative
information
GROUP'S PILLAR 3
Table
1
KM1
Main topics covered
NIIF-9FL
2
Credit quality of exposures by carbon-intensive & sustainable
sectors
3
Economic activity sector (NACE) breakdown by geographical
(maturity buckets)
4
Energy efficiency of immovable properties
CC1
CC2
OV1
CR1
CR1_A
CR2
CR2_A
CR3
CR4
CR5
CR6
CR6
CR6
CR7
CR7_A
CR8
CR10_1
CR10_2
5
Climate change transition risk (scope 3 emissions) – 2024
6
Top carbon-intensive firms exposures (banking book by sector)
7
Climate change physical risk (credit risk exposure by
geography / sector)
8
Green Asset Ratio (GAR) calculation, KPIs – (two phases
February 2023 – August 2024)
9
Other climate change mitigation actions
+ 15%
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CR10_3
CR10_4
CR10_5
CQ1
CQ2
CQ4
CQ5
CQ6
CQ7
CQ8
CCR1
CCR2
CCR3
CCR4
CCR4
CCR5
CCR6
CCR7
CCR8
SEC1
SEC2
SEC3
SEC4
SEC5
MR1
MR2_A
MR2_B
MR3
MR4
LR1
LR2
LR3
LIQ1
LIQB
LIQ2
57
CCyB1
CCyB2
60
61
62
Description
Main capital figures and capital adequacy ratios
Key metrics template (KM1)
IFRS 9-FL Template: Comparison of institutions’ own funds and capital and leverage ratios with and without the application of transitional arrangements for IFRS
9 or analogous ECLs
Composition of regulatory own funds
Reconciliation: balance under accounting consolidation / balance under regulatory consolidation
Overview of RWAs
Performing and non-performing exposures and related provisions
Maturity of exposures
Changes in stock of general and specific credit risk adjustments
Changes in stock of non-performing loans and debt securities
Credit risk mitigation techniques - IRB and SA
Credit risk exposure and CRM effects
Standardised approach (including a breakdown of exposures post conversion factor and post mitigation techniques)
AIRB approach. Credit risk exposures by portfolios class and PD range
AIRB approach. Credit risk exposures by portfolios class and PD range. Retail portfolios
FIRB approach. Credit risk exposures by portfolios class and PD range
IRB approach. Effect on RWA of credit derivatives used as CRM techniques
IRB approach – Disclosure of the extent of the use of CRM techniques
RWA flow statement of credit risk exposures under IRB
Specialised lending exposures under the simple riskweighted approach.Project finance (Slotting approach)
Specialised lending exposures under the simple riskweighted approach.Income-producing real estate and high volatility commercial real estate (Slotting
approach)
Specialised lending exposures under the simple riskweighted approach.: Object finance (Slotting approach)
Specialised lending exposures under the simple riskweighted approach.Commodities finance (Slotting approach)
Equity exposures under the simple riskweighted approach
Credit quality of forborne exposures
Quality of forbearance
Quality of non-performing exposures by geography
Credit quality of loans and advances by industry
Collateral valuation - loans and advances
Collateral obtained by taking possession and execution processes
Collateral obtained by taking possession and execution processes – vintage breakdown
Analysis of the counterparty credit risk (CCR) exposure by approach
Credit valuation adjustment capital charge (CVA)
Standardised approach – CCR exposures by regulatory portfolio and risk
AIRB approach- CCR exposures by portfolio and PD scale
FIRB approach- CCR exposures by portfolio and PD scale
Impact of netting and collateral held on exposure values
Credit derivatives exposures
APR flow statement of counterparty risk exposures under the IMM method
Exposures to central counterparties
Securitisation exposures in the banking book
Securitisation exposures in the trading book
Securitisation exposures in the banking book and associated regulatory capital requirements (Bank acting as originator or sponsor)
Securitisation exposures in the banking book and associated regulatory capital requirements (bank acts as an investor)
Exposures securitised by the institution - Exposures in default and specific credit risk adjustments
Market risk under standardised approach
Market risk under IMA approach
RWA flow statements of market risk exposures under IMA
VaR, Stressed VaR and IRC by geography
Comparison of VaR estimates with gains/losses
Summary reconciliation of accounting assets and leverage ratio exposures
Leverage ratio common disclosure
Split-up of on balance sheet exposures (excluding derivatives, SFTs and exempted exposures)
Quantitative information of LCR
Qualitative information on LCR, which complements template EU LIQ1
Net Stable Funding Ratio
Capital instruments main features template
Geographical distribution of credit exposures relevant for the calculation of the countercyclical buffer (CCyB1)
Amount of institution-specific countercyclical capital buffer (CCyB2)
Information on loans and advances subject to legislative and non-legislative moratoria
Breakdown of loans and advances subject to legislative and non-legislative moratoria by residual maturity of moratoria
Information on newly originated loans and advances provided under newly applicable public guarantee schemes introduced in response to COVID-19 crisis
22
Pillar 3 Climate disclosure
Some examples: Business Model and Policies & Due Diligence Processes
1
2
3
4
5
Disclosure on Business Model
Please provide ESG related information regarding the entity's business model below. The form should be filled out in accordance to the NBG's ESG Reporting and Disclosure Principles. Please
note that the questions below are non-exhaustive and are provided for general guidance.
Questions
Answer
Additional Comments
Describe the impact of ESG risks and opportunities of the investment
and lending portfolios on the entity's business model, strategy and
financial planning.
Describe whether and how the entity considers that its counterparties
take ESG risks and opportunities into account.
Describe how the entity incorporates the assessment of ESG risks and
opportunities into relevant investment and lending strategies.
Describe how the transition to a lower-carbon economy might affect
relevant investment and lending strategies.
Describe the ways in which the entity’s business model can affect the
environment and society both positively and negatively.
Describe opportunities related to resource efficiency and cost savings,
the adoption of low-emission/polluting energy sources, the development
of new products and services, access to new markets, and building
resilience along the value chain.
Bank of Georgia recognizes that its operations have both an indirect and
direct impact on the environment and the society in which it operates.
The Bank is committed to prudent environmental and social risk
management to decrease the negative impact on the environment and
community and help realize opportunities in line with the Bank's mission
and strategy.
For more information on the Bank's
Environmental and Social Management System
in relation to evaluation of the ESG-related risks
and opportunities of the Bank's investments and
loan portfolios, see pages 113-116 of Bank of
Georgia's Separate Management Report 2020 https://bankofgeorgia.ge/files/820f194b-5678-4636a0ff-7e6318b27a89.pdf
Other relevant information
Since 2012, to ensure that the Bank's financing decisions are made
through risk-based, sector-specific environmental and social risk
assessment process, Bank of Georgia has in place Environmental and
Social Risk Management Procedures. These procedures are fully
integrated into the Bank's credit risk management process and are
regularly used in all financing decision making. The main purpose of
these procedures is to reduce any negative impacts on the environment
and the communities which may be affected by the activities the Bank
finances and to reduce ESG-related financial, reputational and legal risks
associated with the Bank's financing operations. For the evaluation of
customers with high E&S risks, the Bank uses the IFC Performance
Standards (PS) and the EBRD Performance Requirements (PRs). The
Bank also uses publicly available technical reference documents with
general and industry-specific examples of good international industry
practice to identify and manage E&S risks, including that of EBRD's and
IFC's.
The Bank intends to integrate climate-related risks into its credit risk
framework and business resilience assessments. The Bank will be
describing and managing climate-related risks in line with the Task Force
on Climate-related Financial Disclosures (TCFD) recommendations.
The Bank has established an internal road map for the implementation of
TCFD recommendations for 2021-2023. The Bank will address each of
the four TCFD pillars – Governance, Strategy, Risk Management, and
Metrics and Targets.
Disclosure on Policies and Due Diligence Processes
Please provide ESG related information regarding the entity's policies and due diligence processes below. The form should be filled out in accordance to the NBG's ESG Reporting and
Disclosure Principles. Please note that the questions below are non-exhaustive and are provided for general guidance.
Questions
Answer
Additional Comments
Describe any entity policies related to ESG issues.
Operating with a sustainability mindset requires that Bank of Georgia
prudently manages risks as well as tap opportunities that
support the wants and needs of its customers, empower its employees,
and enhance the economic and social
welfare of local communities while mitigating negative impacts on people
and the environment.
For more information on the Bank's
ESG-related matters, see Bank of
Georgia's Separate Management
Report 2020 https://bankofgeorgia.ge/files/820f194b5678-4636-a0ff-7e6318b27a89.pdf
ESG matters are integrated in Bank of Georgia's strategy and business
processes. Different areas are managed by the respective directions.
Environmental and Social Risk Management System is approved by the
Bank's Management Board and is supervised by the Senior Management
and the Supervisory Board.
- Risk Management - pages 64-76;
- Principal Risks and Uncertainties pages 77-90;
- Responsible Business - pages 91119.
Describe any ESG-related targets the entity has set as part of its
policies.
Describe the oversight of ESG governance by its executive officer(s),
board committee or highest governing body.
Describe how the entity encourages better disclosure and practices
related to ESG-related risks to improve data availability. Also, any effort
to increase the awareness of counterparties, and more generally of
customers, of the relevance of ESG-related issues as part of their
lending and investment processes.
Describe how ESG-related issues are considered as drivers of value in
the entity’s investment decision process.
Describe the entity's approach for incorporating ESG aspects into
practices.
Describe the entity's approach to due diligence (including project level)
and any particular standards or guidelines the entity follows.
Other relevant information
WORLD BANK - GREEN FINANCE
23
Pillar 3 Climate disclosure
Some examples: Outcomes and Principal Risks and Management
1
2
3
4
5
Disclosure on Outcomes
Please provide ESG related information regarding the entity's outcomes below. The form should be filled out in accordance to the NBG's ESG Reporting and Disclosure Principles.
Please note that the questions below are non-exhaustive and are provided for general guidance.
Questions
Answer
Additional Comments
Describe the outcomes of the entity's ESG policy, including the
performance against the indicators used and targets set to manage
ESG risks and opportunities.
Bank of Georgia's ESG strategy is focused on effectively managing risks
that may affect people and the environment, as well as on unlocking
opportunities that empower customers, employees, and the communities
where the Bank operates.
For more information on the Bank's
results, see pages 91-119 of Bank of
Georgia's Separate Management
Report 2020 https://bankofgeorgia.ge/files/820f194b5678-4636-a0ff-7e6318b27a89.pdf
Describe the development trend of the amount of ESG-related assets
against any relevant target set and the related risks over time.
Other relevant information
As part of its sustainability strategy, Bank of Georgia has policies in
place that govern the processes in the listed areas accordingly.
Bank of Georgia’s ESG performance in 2020 has been given high scores
by the independent ratings agencies assigned to the Bank’s ultimate
parent company, Bank of Georgia Group plc.
Disclosure on Principal Risks and Management
Please provide ESG related information regarding the entity's principal ESG risk s and how those risk s are managed and mitigated. The form should be filled out in accordance to the
NBG's ESG Reporting and Disclosure Principles. Please note that the questions below are non-exhaustive and are provided for general guidance.
Questions
Answer
Additional Comments
Describe the entity’s processes for identifying and assessing ESG
risks over the short, medium, and long term and disclose how the
entity defines short, medium, and long term.
Describe the principal ESG risks the entity has identified over the
short, medium, and long term and any assumptions that have been
made when identifying these risks.
Bank of Georgia identifies, evaluates, manages and monitors the risks
that it faces through an integrated control framework
supported by formal policies and procedures, clearly delegated authority
levels and comprehensive reporting. Bank of Georgia's Supervisory
Board, supported by its Audit and Corporate Governance and Risk
Committees and the Management Board, is ultimately responsible for the
Bank’s risk management and internal controls.
For more information on the Bank's risk
management and principal risks and
opportunities, see Bank of Georgia's
Separate Management Report 2020 https://bankofgeorgia.ge/files/820f194b5678-4636-a0ff-7e6318b27a89.pdf
Describe processes for managing ESG risks and how the entity is
managing the particular ESG risks that it has identified.
In 2020, Bank of Georgia identified Climate Risk as an emerging risk and
Describe how processes for identifying, assessing, and managing ESG intends to integrate climate-related risks into its credit risk framework
and business resilience assessments. In 2021, the Bank will be
risks are integrated into the entity’s overall risk management.
describing and managing climate-related risks in line with the Task Force
Describe how the entity has assessed the exposure of financial assets on Climate-related Financial Disclosures (TCFD) recommendations.
and nonfinancial assets to ESG risks.
Describe characterisation of the entity's ESG risks in the context of
traditional industry risk categories such as credit risk, market risk and
operational risk.
- Risk Management - pages 64-76;
- Principal Risks and Uncertainties pages 77-90;
- Responsible Business - pages 91119.
Describe volume of the collateral highly exposed to ESG risks.
Other relevant information
WORLD BANK - GREEN FINANCE
24
Pillar 3 Climate disclosure
Some examples: KPIs
1
Disclosure on KPIs
Unit of measure
Note
Answer
Comment
Environmental
1 Volume of green loans issued during the reporting year (flow)
2 Share of green loans in the total loans issued during the reporting year
3 Total amount of green loans, outstanding as of end of reporting year
4
Share of green loans in the total outstanding portfolio as of end of reporting
year
currency of issuance
Please, provide the definition of
"green" used by the entity; if the
entity issues green loans in
different currencies, please
report them separately for
different currencies
%
currency of issuance
If the entity issues green loans in
different currencies, please
GEL 522 Million (14.8 ml in GEL, 6.7 ml in
report them separately for
EUR, 146.9 ml. in USD)
different currencies
%
Share of green investment securities in total amount of investment
securities as of end of reporting year
7 Volume of green debt securities issued during the reporting year
3.6%
Includes total RE portfolio (HPPs) and other
sustainable loans financed by IFIs.
Includes total RE portfolio (HPPs) and other
sustainable loans financed by IFIs.
25
27
Includes total RE portfolio (HPPs) and other
sustainable loans financed by IFIs.
Includes total RE portfolio (HPPs) and other
sustainable loans financed by IFIs.
28
29
30
%
N/A
If the entity issues green debt
securities in different currencies,
currency of issuance
please report them separately
for different currencies
N/A
N/A
Share of green debt securities in the total debt securities issued during the
reporting year
%
9
Total volume of green debt securities issued, outstanding as of end of
reporting year
currency of issuance
If the entity issues green debt
securities in different currencies,
please report them separately
for different currencies
%
11
Percentage of loans that has been rejected based on ESG criteria during the
%
reporting year
12
Share of non-performing green loans in the total green loans as of end of
reporting year
%
13
Does the entity initiated any environmentally friendly activities (for example,
14 introduction of EVs, rooftop PVs at local branches, better insulation for
offices, etc.), please specify
15
Gross GHG emissions (Scope 1, Scope 2 and Scope 3) for the reporting
year
16 GHG emissions target, if any
Yes/No
Yes/No
Yes/No
Yes/No
Human rights - Accessibility of facilities, documents and websites to people
with disabilities
32
Human rights - Number of grievances about human rights impacts filed,
addressed, or resolved during the reporting year
33
Share of social/sustainable loans in the total outstanding portfolio as of end
of reporting year
3%
Yes
Metric tons of CO2
equivalent
Waste seperation in bank's Head Offices;
Plastic, paper and general waste are collected in
seperate bins in HOs.
7.30%
337
183 Calendar days - Maternity leave
200 Calendar days - Complicated labor
Days
Please, report seperately for
individuals and legal entities
Please, report seperately for
individuals and legal entities
4 (individuals)
0
The numbers are given based on GRI definitions;
There were no non-compliance cases identified.
The numbers are given based on GRI definitions;
There were no non-compliance cases identified.
Yes
93.5%
Describe how the facilities,
documents and websites are
adjusted to ensure their
accessibility for employees, as
well as for customers with
disabilities
Volume of social/sustainable investment securities as of end of reporting
year
Share of social/sustainable investment securities in total amount of
35
investment securities as of end of reporting year
-5%
%
70%
Please, report seperately for
individuals and legal entities
%
The most of our branches are equiped with
special ramps for entering the facilities.
For our employees, we use Intranet, an
online platform, for sharing information to
our employees. Every employee has
access to Intranet, where company's all
basic documents, policies, procedures
and news are uploaded.
The bank developed a special procedure
for serving the blind or partially sighted
clients.
The platform for financial education
publishes educational video where
information is given in verbal and written
form, as well.
%
The majority of TBC Fleet (70%) are hybrid and
electric vehicles.
36
Workplace health and safety - does the entity have workplace health and
safety policies and procedures? Please, provide details.
37
Expenses and fines on filings, law suits related to anti-competitive behavior,
GEL
anti-trust and monopoly practices during the reporting year
Yes/No
0
0.6%
Please, provide the definition of
"social/sustainable" used by the
entity
34
Scope 1 - 3272; scope 2 - 1614
Metric tons of CO2
equivalent achieved
or % reduction, from
base year
Includes social loan portfolio financed by IFIs out of
total sustainable portfolio.
N/A
N/A
This may include emergency
response training, first aid and
fire safety training, good
workplace culture, overtime
practices, and healthy office
buildings, etc.
Yes
Target for 2021 year
1. Human capital management policies and
procedures
2. Occupational safety management plan
3. Labor safety policy
4. Emergency action plan
5. Training program (fire safety, electrical safety,
general occupational safety requirements and
legislation, ergonomics and first aid)
6. Infectious disease preparedness and response
plan, Covid-19 training
Governance
%
%
senior management - board of
directors; supervisory board
middle management - defined
according to internal definition
Board of directors - 17%;
Supervisory Board - 29%
36%
-
<20
20-30
30-40
40-50
>50
<20 - 38
20-30 - 3304
30-40 - 2531
40-50 - 602
>50 - 184
0
Does the entity have the following policies in place:
38
%
age structure/distribution number of employees per age
group:
21 Diversity in the workplace - maturity of workforce as of end of reporting year
990 This data is for external trainings
annual turnover rate =
100*(number of employees who
left)/ ((beginning + ending
number of employees)/2)
100% of SME and Corpotate porfolio
Social
Diversity in the workplace - percentage of female employees as of end of
the reporting year
Diversity in the workplace - percentage of females in senior management as
18
of end of the reporting year
Diversity in the workplace - percentage of females in middle management
19
as of end of the reporting year
Diversity in the workplace - percentage of persons with disabilities employed
20
as of end of the reporting year
17
5
0.11%
Yes
Yes/No
%
Customer privacy - total number of complaints received concerning
breaches of customer privacy during the reporting year
Customer privacy - total number of identified leaks, thefts, or losses of
customer data during the reporting year
Customer satisfaction - does the entity conduct surveys on customer
Yes/No
satisfaction?
Customer satisfaction - percentage of total customers surveyed comprising
%
satisfied customers during the reporting year
31
Does the entity use any of the following waste management policies:
Reducing;
Reusing;
Recycling;
Composting;
Other, please specify:
4
75%
GEL
N/A
100%
Percentage of those loans that
have undergone ESG screening.
Non-performing loans - the sum
of substandard, doubtful and
loss loans.
%
Parental leave - total number of employees that took parental leave during
the reporting year
26 Parental leave - average length of parental leave during the reporting year
N/A
8
10 Percentage of loans undergone ESG screening during the reporting year
Training & education - share of employees who have received the trainings
during the reporting year
Training & education - average expenses on training per employee during
23
the reporting year
22
24 Employee turnover rate
GEL 80 Million (5.6 ml. in GEL, 1.7 ml. in
EUR, 20.9 ml in USD)
1.2%
5 Volume of green investment securities as of end of reporting year
6
3
Social (cont.)
Please provide ESG related information regarding the entity's principal ESG risks and how those risks are managed and mitigated. The form should be filled out in accordance to the NBG's ESG Reporting and
Disclosure Principles .
KPI
2
39
Anti-bribery policy;
Anti-corruption and anti-money laundering policy;
Policy towards business integrity;
Ethics policy.
Is there a designated officer/body responsible for overseeing environmental
Yes/No
and social policies and practices?
40 Does board approve both the ESG strategy and policies?
41
Yes/No
Yes/No
Yes/No
Yes/No
Yes
Yes
Yes/No
Yes
Are there processes for consultation between stakeholders and the board of
Yes/No
directors (supervisory board) on environmental and social topics?
Yes
WORLD BANK - GREEN FINANCE
1. Anti-bribery, Anti-Corruption and Prevention of the
Facilitation of Tax Evasion Policy;
2. Anti-money laundering policy;
3. Business Continuity Policy
4. Code of Ethics.
Head of Environmental and Social Risk Management
Group
Supervisory board revises and approves policies
25
Kiev, December 2021
Thank you