Environmental, Social and Governance risk issues have been defined as pillars impacting the financial performance of corporations and financial institutions. As part of the bank's vision to establish an integrated risk management framework designed to safeguard financial resilience, support sustainable growth, and enhance long-term value creation, the Bank has begun integrating ESG considerations into its risk management and decision-making processes, particularly within its lending and investment activities. This integration proliferates in the establishment of the bank's Environmental and Social Management System (ESMS) and Environmental and Social Risk Management (ESRM), that integrates the 3 pillars of ESG into the bank's DNA and the client's business outlooks.
The bank identifies the E&S Management System (ESMS) as the systematic framework used to identify policies in line with the bank's mandate, manage their E&S impacts and risks, identify opportunities and support new product development. SCB's E&S management system includes policies, procedures, and guidelines for identifying, assessing, and managing E&S risks and impacts.
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Stemming from the concept of ESMS, the bank applies the Environmental and Social Risk Management framework, which is the process of identifying, assessing, and managing E&S risks and is integrated into a credit risk management process where the objective of ESRM is to minimize the negative impacts of E&S risks on the bank's financial performance and reputation. The bank operates its ESRM as follows:
E&S Risks may have a negative financial impact leading to credit loss. As a result, E&S Risks are identified within the credit process to ensure a holistic overlook of the clients' main risks. E&S Risk assessment is based on the identification, assessment, monitoring and enhancement of the customer's ESG compliance and performance to ensure ultimate financial and non-financial growth and stability while attaining the best service for clients.
The bank's portfolio is monitored against main E&S Risks with specific attention to climate-related risks. E&S Portfolio Management guarantees the monitoring of the overall portfolio quality in terms of E&S Risk exposure bearing in mind regulatory requirements and climate-related probabilities.