ESG,STRATEGY, PRINCIPLES ,PERFORMANCE, practices,POLICIES,REPORTING

,METRICS,Objectives,GOALS, TARGETS
INITIATIVES,OPPORTUNITIES,CHALLENGES,IMPACTS,

REPORTING STANDARD

STAKE HOLDER(undetstand) EXPECTATION &(incorporate)FEEDBACK

resulting impact on banks’ P&L and liquidity.

ESG risks can affect the bank directly (e.g. storm damage to bank buildings), but also affect
customers (change in sales opportunities, production disruptions, etc.) leading to, for
example, higher loan defaults

ESG factors have to be checked and assessed in the course of lending, similar to the
examination of reputational risks in the KYC process.

ESG risks must be considered for every risk type, i.e. within each risk type an examination
must be made of the extent ESG risks are apt to change the assessment of the respective
risk type

ESG risk tool for stressing credit portfolios qualitatively

Financial institutions must integrate ESG reporting into their operations and decision-
making processes for effective risk management.

To quantify and report ESG performance, banks rely on both qualitative assessments and
quantitative analysis. Standardized disclosure methods, such as sustainability reports and
annual reports, keep stakeholders informed of banks ‗ progress aligning their activities
with ESG objectives

ESG RISKS

E- damage bank assets and disrupt operations

S- reputational damage and legal liabilities.

G- regulatory fines and loss of investor trust.

ESG risks can impact a bank's profitability, reputation, and operational resilience
ESG OPPORTUNITIES

Competitive Advantage
 • Market Differentiation: Leading in ESG performance allows banks to differentiate
themselves from competitors. It positions them as forward-thinking and responsible
entities, attracting customers and investors.

Innovation Opportunities: Embracing ESG principles can drive innovation in products and
services, such as green financing options, which appeal to a growing market segment

Create a feedback loop by reporting back to stakeholders on how their input has been
incorporated into ESG strategies is after upted esg strategities by using as inputs

#PMSM
2. Proactive Framework for ESG Integration(3),,,,2-3-3
Risk Identification and Assessment: Methods for Identifying and Assessing ESG Risks

• Risk Mapping: Identify potential ESG risks across various categories (environmental,
social, governance) and map their potential impacts on the bank's operations and
financial performance.
• Scenario Analysis: Conduct scenario analyses to evaluate the effects of different ESG
risk scenarios on the bank. For example, assess the impact of regulatory changes on
carbon emissions or social unrest on community relations.

Integration into ERM: steps to Integrate ESG Risks into Existing Risk Management
Frameworks

• Align Risk Categories: Incorporate ESG risks into the existing risk taxonomy, ensuring
they are evaluated alongside traditional risks like credit and market risks.
• Develop ESG Policies: Create specific ESG policies and procedures to guide the
identification, assessment, and management of ESG risks.
• Cross-Functional Collaboration: Foster collaboration between the ESG team and other
departments to ensure seamless integration of ESG risks into the ERM framework.

Setting Risk Appetite and Tolerance: How to Define and Implement Risk Appetite and
Tolerance Levels for ESG Risks

• Define Risk Appetite: Engage senior leadership and stakeholders to define the bank’s
risk appetite for ESG risks, ensuring alignment with strategic objectives.
• Set Risk Tolerance Levels: Establish quantitative and qualitative measures for ESG
risks and set clear thresholds for acceptable risk levels.
• Regular Reviews: Continuously monitor and review risk appetite and tolerance levels to
adapt to changing risk landscapes and emerging trends.
3. Monitoring and Reporting(2)…. 2-3
Continuous Monitoring: Establish Systems for Continuous Monitoring of ESG Risks

• Real-Time Data Collection: Use advanced data analytics and IoT sensors to gather real-
time data on ESG indicators, such as carbon emissions and social impact.
• Automated Monitoring Systems: Develop automated systems to continuously track
ESG metrics and flag any deviations from set targets.

Reporting Mechanisms: Develop Robust Reporting Mechanisms to Ensure Transparency

and Accountability

• Regular ESG Reporting: Publish detailed ESG reports regularly, outlining performance,
challenges, and future plans.
• Integrated Reporting: Combine ESG and financial reporting to provide a
comprehensive view of the bank’s overall health and strategy.
• Third-Party Verification: Engage independent auditors to verify ESG reports,
enhancing credibility and trust.

4. Stakeholder Engagement(2) 2-2

Engage with Stakeholders, Including Investors, Customers, and Regulators, to Align ESG
Objectives

• Regular Dialogues: Conduct regular meetings, surveys, and consultations with

stakeholders to gather their input on ESG strategies.
• Advisory Panels: Establish advisory panels comprising representatives from various
stakeholder groups to provide ongoing guidance on ESG matters.

Use Stakeholder Feedback to Refine ESG Strategies

• Feedback Mechanisms: Create structured mechanisms for stakeholders to provide

feedback on ESG initiatives.
• Incorporate Feedback: Use the insights gained from stakeholder feedback to refine and
improve ESG policies and practices continuously.

5. Mitigation Strategies
Develop and Implement Plans to Address Identified ESG Risks

• Environmental Mitigation: Invest in green technologies and sustainable practices to

reduce environmental risks, such as renewable energy sources and energy-efficient
buildings.
 • Social Mitigation: Enhance labor practices, promote diversity and inclusion, and
invest in community development projects to mitigate social risks.
• Governance Mitigation: Strengthen governance structures, promote ethical conduct,
and ensure transparency and accountability to mitigate governance risks.

❖ Actionable Recommendations 2er DFS … esg(Data

Quality,Policies innovative practices), CFC,SHE,Regular
review&improve
1. Enhance ESG Data Quality: Invest in advanced data analytics and real-time monitoring
systems to improve the accuracy and comprehensiveness of ESG data.
2. Strengthen ESG Policies: Develop and implement robust ESG policies that exceed
regulatory requirements and align with best practices.
3. Foster Cross-Functional Collaboration: Promote collaboration between the ESG team
and other departments to ensure seamless integration of ESG risks.
4. Engage Stakeholders Continuously: Maintain regular dialogues with stakeholders to
gathe r input and refine ESG strategies.
5. Develop Innovative ESG Practices: Invest in green financing, digital inclusion, and
sustainable operations to enhance ESG performance.
6. Regularly Review and Improve: Conduct periodic reviews of ESG strategies and
performance, and continuously adapt based on feedback and emerging trends.

Strategic ESG Leadership in Banks

Commitment to ESG Principles
• Develop and Implement a Robust ESG Policy: Create a comprehensive ESG
policy that goes beyond compliance

• Leadership Endorsement actively supports ESG initiatives. Through statements,

participation in ESG activities, and leading by example.
• Set Clear Goals and Targets: Establish(SMART) goals for ESG performance
• Transparency and Reporting: Regularly publish detailed ESG reports

Innovative Practices
Green Financing: Offer green bonds and loans that fund environmentally friendly projects

Sustainable Investment Funds: Create investment funds that focus on companies with
strong ESG performance.
Digital Solutions for Financial Inclusion: Develop and implement digital banking
solutions to increase financial inclusion, especially in underserved and rural areas.

Eco-friendly Branches : Implement sustainable practices

Building Reputation:

• Transparency: Maintain open and honest communication about ESG goals, progress,
and challenges through regular reporting.
• Stakeholder Engagement: Actively engage with stakeholders to understand their
expectations and incorporate their feedback into the bank’s ESG strategy.
• Awards and Certifications: Pursue industry awards and certifications to gain external
validation and enhance the bank’s reputation.

❖ Stakeholder Engagement
➢ Engagement Strategies:

• Regular Dialogues: Conduct regular meetings, surveys, and focus groups

• Advisory Panels: Create advisory panels with representatives from different stakeholder
groups to provide ongoing input and guidance on ESG issues.

➢ Transparency and Accountability:

• ESG Reporting: Publish detailed ESG reports that provide transparency about the bank’s
ESG performance, including successes and areas for improvement.
• Feedback Mechanisms: Establish mechanisms for stakeholders to provide feedback on
ESG initiatives, such as suggestion boxes, online platforms, and public forums.
• Third-Party Verification: Engage independent auditors to verify ESG reports and
practices, enhancing credibility and trust.

❖ Benchmarking and Continuous Improvement

➢ Benchmarking:

• Identify Leaders: Benchmark Coopbank’s ESG performance against industry leaders

and best practices.
• Set Performance Targets: Establish clear benchmarks and performance targets to strive
towards based on industry standards and stakeholder expectations.

➢ Continuous Improvement:

• Regular Reviews: Conduct periodic reviews of ESG strategies and performance to

identify areas for improvement.
• Adapt and Innovate: Continuously adapt and innovate ESG practices based on
feedback, emerging trends, and new technologies.
 ➢ Employee Training: Provide ongoing training and development programs to ensure
employees are knowledgeable about ESG principles and practices

❖Actionable Recommendations:

1. Enhance Data Quality: Improve the accuracy and comprehensiveness of ESG data
collection and reporting.

2. Strengthen Policies: Develop and implement comprehensive ESG policies that exceed
regulatory requirements.

3. Engage Stakeholders: Foster continuous engagement with stakeholders to gather input

and feedback on ESG initiatives.

4. Promote Innovation: Invest in green financing, digital inclusion, and sustainable

practices within bank operations.

5. Regular Review and Improvement: Conduct regular reviews of ESG performance and
continuously improve based on feedback and benchmarking results.

6. Pursue Certifications: Seek industry certifications and awards to validate ESG

performance and enhance credibility.