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Management of ESG and climate change related 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 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 Environmental, Social and Governance Risks in lending transations, to the Management of reputational Risks and to the management of the Most Significant Transactions
  • their assessment as part of the processes relating to the implementation of the Equator Principles and Reputational Risk Clearing
  • a specific focus on reputational risks and Climate Change risk within the "Risk Appetite Framework"
ESG risks in loans: policies and guidelines

The Group has developed specific Guidelines for the governance of environmental social and governance (ESG) risks 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”), the coal policy (“Rules for lending operations in the coal sector”) and the rules for the unconventional oil and gas sector ("Rules on Oil&Gas sector").

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 (ESG) risks

Rules on the granting of credit and transactions in the armament sector

Rules for lending operations in the coal sector

Rules on Oil&Gas sector

ESG risk management: potential impacts and mitigation actions

The Group has implemented specific processes and responsibilities to understand and manage risks in such a way as to ensure long-term soundness and continuity, extending the benefits to its stakeholders. Below is an overview of the main ESG risks that are significant due to their potential impact on company activities and the related mitigation measures.

Issue Potential risk Potential impacts
Mitigation measures
Integrity in corporate
conduct

Compliance risks with applicable legislation (corruption, money laundering, taxation, free competition, privacy, labour law) and 
ineffective response to regulatory changes 
Reputational risks

 

 

Fines and penalties, limitations to conducting business 
Damage to reputation and brand

Internal control system divided into several levels 
Definition of corporate internal regulations  
Specialist training for employees  
Introducing a whistleblowing system 
Adoption of internal regulations for the conduct of company operations also in relation to ESG issues
Quality of service and customer satisfaction Unfair commercial practices 
Inadequate customer service levels 
Inadequate customer communications 
Loss of access to services
Customer dissatisfaction with loss of competitiveness, customers and market shares leading to reduced profitability  
Disputes and complaints 
Fines and penalties 
Damage to reputation and brand
Model focussing on the level of service, on personalised advisory services, and on transparency 
Process of clearing for new products and services 
Careful and proactive management of complaints 
Dialogue with Consumer Associations 
Initiatives aimed at ensuring accessibility to services 
Business continuity plan
Innovation, digital transformation and cybersecurity Ineffective transition from traditional to digital channels 
IT risk 
Business continuity in the event of an emergency, blocking or malfunctions
Loss of competitiveness, customers and market shares leading to reduced profitability 
Disputes and complaints 
Fines and penalties 
Damage to reputation and brand
Prevention of IT risk 
Careful assessment of emerging risks 
Development of an innovative offering/ solutions 
Physical network integration with online structures (e.g. Isybank)
Dissemination of the digital culture 
Innovations aimed at ensuring accessibility to services for people with disabilities
Financial inclusion and supporting production Inadequate offering of products/services to customers 
Reputational risks
Loss of competitiveness, customers and market shares leading to reduced profitability 
Damage to reputation and brand
Offering development in favour or financial inclusion for vulnerable people 
Development of solutions in support of the Third Sector 
Offering development to support production
Sustainable investments and insurance Assessment and control of ESG risks in the investment portfolios 
Investments in controversial sectors 
Reputational risks 
Failure to comply with regulations
Loss of competitiveness, market shares and customers who are conscious of ESG aspects, leading to reduced profitability 
Damage to reputation and brand
Fines and penalties
IIntegration of ESG factors into the Investment process 
Development of an ESG offering 
Company engagement activities 
ESG training 
Internal control system 
Subscription to Principles for Responsible Investment (PRI) and Principles of Stewardship 
Subscription to Principles for Sustainable Insurance (PSI)
Community support and commitment to culture Reputational risks Damage to reputation and brand Development of investments and partnerships with a social impact in the community 
Development of training and work projects for the next generations 
Initiatives supporting the promotion of culture for social cohesion 
Development of institutional initiatives in support of the community
Employment protection Conflicts and related labour dispute risks Disputes 
Strikes with impacts on service continuity 
for customers and profitability 
Employee dissatisfaction with impacts on productivity
Responsible management of corporate restructuring processes, with the reallocation of employees to other activities 
New hires to promote generational change 
Management of labour dispute risks 
System of labour relations
Retention, enhancement, diversity and inclusion of the Group’s people Inadequate employee enhancement and motivation 
Inability to attract and retain talent 
Termination of the employment relationship with managers holding relevant roles 
Insufficient focus on diversity and inclusion issues
Employee dissatisfaction with impacts on productivity 
Lack of adequately trained and qualified personnel 
Inadequate customer service levels 
Damage to reputation and brand
Investments in training and development activities 
Talent Attraction strategy (short and long term) which, broken down by various communication actions and on different channels, is defined with respect to the different targets of interest 
Talent management and development programmes
Recognition of employees’ merit 
New incentive plans (including LTIP) to foster individual entrepreneurship
Succession plans for business continuity
Initiatives to enhance diversity and inclusion, including training with a
specific focus on the topic 
Diversity, Equity & Inclusion Principles 
Sexual orientation and identity diversity regulations 
Rules for combating sexual harassment 
Commitment to the “Women’s Empowerment Principles” 
Request for certifications on relevant topics (e.g. ISO PDR 125:2022)
Health, safety and wellbeing of the Group’s people Accidents in the workplace 
Occupational diseases
Risks associated with the COVID-19 pandemic 
Robberies
Inadequate employee motivation
Work/life balance difficulties
Employee dissatisfaction with impacts on productivity
Damage to persons arising from the COVID-19 pandemic
Damage to persons and objects during robberies
Damage to reputation and brand 
Employee dissatisfaction with impacts on productivity
Loss of skills as a result of employee exits
Health and safety training 
Certification of the health and safety
management system (ISO 45001) in all 
branches and buildings in Italy 
Certification of the psychosocial risk 
management system (ISO45003) 
Biosafety Trust Certification Protocol 
aimed at preventing and mitigating the
risk of infections from biological agents
Assessment and management of
infection risk 
Risk assessment for workplaces and
work processes
Preventing and combating robberies
Risk assessment of subjective and
social conditions
Assessment of work-related stress
Work-life balance initiatives
Flexible working and new organisational
models
Voluntary and free medical examinations to promote people’s health 
Offering of solutions for welfare and quality of life in the company 
Development of climate surveys
Transition to a sustainable, green and circular economy Management of ESG risks in loans
Transactions or loans in controversial sectors
Reputational risks
Regulatory compliance risk
Litigation risk
 
Loss of competitiveness, market shares and customers who are conscious of ESG aspects, leading to
reduced profitability
Problem loans or need for provisions
Damage to reputation and brand
Inclusion of ESG, climate change and reputational risks within the Risk Appetite Framework 
Rating model which also includes company qualitative aspects on ESG issues
Risk clearing processes which include environmental, social and governance aspects
Equator Principles for project finance 
Group Guidelines for the Governance of Environmental, Social and Governance (ESG) risks 
Inclusion of ESG factors into the credit framework with Rules for the classification of sustainable credit products and lending transactions 
Development of a specific offering to facilitate the transition with dedicated plafond, including with a view to derisking of loans 
Drafting of a transition plan for the target sectors 
Employee, customer and stakeholder training and engagement 
Research development

Management of risks 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. 

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.

Direct and indirect risks related to climate change

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