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Management of risks and impacts related to climate change

Intesa Sanpaolo takes into account the social, environmental and governance risks, associated with the activities of its customer companies and the economic activities it invests in and pays particular attention to the in-depth study of sustainability issues related to sectors considered sensitive, i.e. those with a significant socio-environmental risk. In this context, the Bank pays particular attention to the risk arising from climate change (both physical risk and transition risk). Key activities in climate risk management  concern:

  • the identification, assessment and measurement of such risks; 
  • the implementation, development and monitoring of a company-wide risk management framework, including risk culture, risk appetite and credit limits.

Within the Risk Appetite Framework (RAF), the Group has introduced a specific reference to climate risk, working to develop its integration into the existing risk management framework with particular reference to credit risk and reputational risk. In 2019 work began on identifying the business sectors in the credit portfolio that are potentially most affected by climate risk, both from transition risk and physical risk, in order to quantify the Group's exposure to these risks. The work follows the TCFD approach, i.e. the logic of financial materiality (impact of climate change on the value of the counterparty and consequently on credit risk).

The potential impacts, the related time horizon (short, medium, long) and the mitigation and adaptation actions taken for each potential risk observed are identified annually, with reference to both indirect and direct risks.

Indirect risks related to climate change

Potential risks
Timeframe* Potential impacts
Actions

Transition

Changes in public policies 
Technological changes
Changes in customer/
consumer preferences

Short/medium/long
term
LOANS
Reduction of business
or increase in costs for
customer companies
with possible
consequences on
creditworthiness and
solvency
ASSET MANAGEMENT
Consequences of
climate change on
companies in the
portfolio with consequent
reduction in the
value of assets under
management
LOANS
Assessment of ESG and climate
risks on loans in sensitive sectors
Inclusion of environmental risks
when assessing creditworthiness
Implementation of self-regulation
policies for the assessment
and management of the socio-environmental
risk of loans in sensitive sectors
Energy transition support through
funding to the Green Economy
and Circular Economy
ASSET MANAGEMENT
Assessment and control of ESG
risks in the investment portfolios
Transition
Changes in public policies
Technological changes
Changes in customer/
consumer preferences
Short/medium/long
term
 
Reputational impact,
negative perception
from stakeholders and
in particular from SRI
investors due to nil or
inadequate management
of such risks
Possible exclusion from
sustainability (ESG)
indices or a worse ESG
position or lower rating

Inclusion of environmental risks
when assessing creditworthiness
Implementation of self-regulation
policies for the assessment
and management of the socio-environmental
risk of loans in
sensitive sectors
Stakeholder engagement initiatives
Participation in international
working groups on climate change
issues
Transition
Changes in environmental 
regulations
Introduction of new
greenhouse gas emission
limits or new related
reporting systems
Short/medium term
Financial implications
of environmental
regulations and emission
limits and/or taxes
imposed on customers
operating in certain
economic sectors
Offering dedicated financial
solutions and specialist advisory
services for customers in the field
of renewable energies and energy
efficiency
Participation in working groups
and initiatives relating to climate
change
Active collaboration with policy
makers to highlight the need for
stable and clear environmental
regulations
Transition
Changes in the regulations 
and incentives on
renewable energy
Short term
Negative impact on loans
to customers interested
in investing in renewable
energy sources, due
to an Italian scenario
characterised by the
uncertainty of public
intervention
Offering advisory services to
customers on new regulations and
incentives for the renewables and
energy efficiency sectors
Transition
Changes in customer/
consumer preferences
 
Short/medium term
Reduction in revenues
for the Group due to a
lower demand for certain
financial services/
products
Offering green products and
services
Green bond issues
Support to the Circular Economy
Physical
Extreme weather events
(floods, heavy snowfall,
whirlwinds)
Short/medium/
longterm
Financial implications
for corporate and retail
customers damaged
by extreme weather
events, with possible
consequences on their
creditworthiness and solvency
 
New subsidised loans intended to
restore damaged structures
Suspension or moratorium of
repayments of loans issued to
damaged customers
Implementation of a credit ceiling
for the reconstruction of damaged
properties in case of disaster
events

* 0-2 years short term; 2-5 years medium term; over 5 years lon g term

Direct risks related to climate change

Potential risks
Timeframe* Potential impacts
Actions
Transition
Changes in environmental
regulations
Short/medium term
Possible fines in
the event of failure
to comply with new
regulations
Constant and precautionary
monitoring of possible changes to
national and European regulations
 
Transition
Introduction of new
greenhouse gas emission
limits or new related reporting
systems
Increased cost of greenhouse
gas emissions
Short/medium term
Costs for upgrading
heating and air
conditioning systems
and for new monitoring
tools
Costs related to
greenhouse gas
emissions
Increase in costs of
energy supply
Implementation and monitoring of
the Climate Change Action Plan
Energy efficiency actions
Increase in the use of renewable
energy sources
Preventive actions to replace old
systems with next-generation
systems with a low environmental
impact, as well as consumption
monitoring systems during the
renovation of branches and
buildings
Transition
Changes in environmental
regulations and standards
that the Group voluntarily
adheres to (ISO standards)
Short/medium term
Costs of changing the
processes of certification
in the event of changes
to standards
Continuous and precautionary 
monitoring of possible changes in
standards
Participation in specific training
courses and workshops
Physical
Extreme weather events
(floods, landslides, heavy,
snowfall, whirlwinds)

Short/medium/long

term

Possible damage to the
Bank’s infrastructure and
possible disruption of
activities
Precautionary assessment of the
hydrogeological risks for buildings
Adoption of a business continuity
plan and measures to prevent/
mitigate/manage physical damage
to the Bank’s structures

* 0-2 years short term; 2-5 years medium term; over 5 years lon g term

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