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Monitoring of ESG and reputational risks

The Intesa Sanpaolo Group, in line with the principles outlined in the Code of Ethics, is aware of the importance of a correct and responsible allocation of resources, according to criteria of social and environmental sustainability. Therefore, it promotes a balanced development aimed at redirecting capital flows towards sustainable investments to balance interests such as the preservation of the natural environment, health, work, the well-being of the community as a whole and the safeguarding of the system of social relations.

Also the Rules for the environmental and energy policy and the Principles on Human Right provide for the consideration of the environmental, social and governance risks associated with the activities of customer companies in the investment and lending decisions by the Group.

To this end, the monitoring of these risks provides for:

  • their inclusion in the Risk Management framework, with particular reference to the Governance of Reputational Risks and the Management of the Most Significant Transactions
  • a specific focus on reputational and climate change risks within the "Risk Appetite Framework"
  • the definition of the list of "sensitive" sectors with reference to ESG and reputational risks and subject to self-regulatory policies
  •  their assessment within the processes related to the implementation of the Equator Principles and Reputational Risk Clearing
ESG risks in loans

The Group has developed specific Guidelines for the governance of environmental social and governance risks regarding lending operations which define the general criteria aimed at excluding the financing of companies and/or projects with particularly relevant environmental, social and governance impacts.

Intesa Sanpaolo, in the evaluation of lending transactions, undertakes not to finance companies and projects that are characterised by their negative impact on:

  • UNESCO World Heritage Sites
  • wetlands under the Ramsar Convention
  • IUCN protected areas I to VI

In addition, the Bank undertakes not to finance companies and projects if these are located in areas of active armed conflict, or if evidence emerges, such as legal proceedings brought by the competent authorities, relating to:

  • human rights violations
  • forced or child labour practices

The sector policies regulating the financing to specific sectors of activities characterised by more relevant ESG and reputational risk profile are referred to this general framework.

The sector policies currently in force are the policy in the armaments sector (“Rules on the granting of credit and transactions in the armament sector”) and the coal policy (“Rules for lending operations in the coal sector”). The armaments policy has been in place since the Group has been created in 2007, the coal sector policy was approved in March 2020 and it regulates both the sector of coal fired power plants and coal mining.

Moreover, within the Risk Management Framework the transactions with customers operating in sensitive sectors are subject to risk clearing, comprising an evaluation of ESG and reputational risk profile. Sensitive sectors are defined as those sectors that present a relevant ESG risk, including climate risk; a specific focus is provided for in relation to Most Relevant Transactions and to transactions subject to the application of the Equator Principles, voluntary guidelines for the management of social and environmental risks in project finance.

Also the assessment of creditworthiness conducted for corporate customers includes socio-environmental aspects. In particular, an innovative rating model has been developed in collaboration with Confindustria Piccola Industria and validated by the ECB. In the model, social and environmental aspects can also have a positive impact, leading to an improvement in the rating. In addition to the usual economic and financial assessments, the model aims to make it easier to access credit, with more favourable financial terms, by highlighting the intangible qualities of the business, such as trademarks, patents, quality and environmental certifications, research and development activities, innovation and digitalisation, development and competitive positioning projects, management of business risk and being part of a supply chain.

Further details

Guidelines for the governance of environmental social and governance risks regarding lending operations

Rules for lending operations in the coal sector

 

Adherence to Equator Principles
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