Credit Policy on Environment, Social and Governance and
Sector-Specific Guidelines

Financial institutions can either encourage or discourage businesses that may harm the environment and society, at an early stage. They also play a vital role in promoting the transition to a low-carbon economy so as to create positive impacts while also mitigating negative impacts from their own operations. Financial institutions can develop financial innovations that generate both income and trustworthiness, alike.

KBank has recognized the importance of managing environmental and social impacts through the provision of financial support via lending and investment. Credit policy on environment, social and governance (ESG) has thus been established. In alignment with international practices, ESG factors are incorporated as criteria for credit underwriting of corporate/project finance and investment in debt instruments. We establish an exclusion list and sector-specific guidelines while having in place measures for risk management appropriate for high-risk customers to ensure that credit supported by KBank will involve effective management of environmental and social impacts, thus promoting stable business growth and generating sustainable returns for all stakeholders over the long term. Moreover, these measures will help prevent KBank from being exposed to risk that may affect its image and operations.

This ESG Credit Policy, as well as sector strategies developed in alignment with the policy, demonstrates KBank commitment and progress against targets to ensure environmental stewardship towards a net zero-carbon society, including our commitment to becoming Net Zero in our own operations by 2030, as well as our commitment to reducing greenhouse gas emissions in our financed portfolio in line with Thailand’s aspirations*; reducing greenhouse gas emissions in significantly impacted sectors, both in terms of greenhouse gas emission volume and proportion of loans extended to each sector; and accelerating this journey where possible.
In accordance with KBank policy on Contribution for Partnerships, KBank aims to create partnerships with all organizations and parties, at home and abroad, to ensure business achievement and ultimate benefit for all stakeholders. KBank does not support partnerships with any lobbying activities. In the context of climate change, KBank does not support lobbying against climate regulations nor climate-denial activities.

Note :
* Thailand’s ambition at COP26 includes 2050 Carbon Neutrality, and 2065 Net Zero Greenhouse Gas Emission.

ESG Exclusion List

KBank requires that consideration be made for characteristics of credit applicants and types of businesses. Credits on ESG exclusion¹ list are as follows:

• Applicants with records of being involved with or that are suspected of being involved with offences under the Anti-Money Laundering Act B.E. 2542 (2019), for example, offences related to narcotics, public fraud, terrorism, gambling, exploitation of natural resources or the environment through the illegal use or taking possession of natural resources for commercial purposes, weapons and war materials, as well as human trafficking
• Credits related to illegal activities or activities that risk violation of laws including domestic environmental laws and international agreements, for example:
• Trade of wild animals and protected wildlife products under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)
• Exports and imports of waste that violate the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (Basel Convention) or related rules and regulations
• Manufacturing, use or trade of pharmaceutical products, chemicals, insecticides, atmosphere-destroying substances and other hazardous substances which are being or have been discontinued under international agreements or national laws. For instance, imports and exports of extremely hazardous chemical substances under the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, or chemical substances that produce pollution under the Stockholm Convention on Persistent Organic Pollutants (POPs)
• Manufacture or sale of living modified organisms (LMO): These activities may be allowed upon the granting of permission by importing countries and compliance with regulations of the Cartagena Protocol.
• Manufacturing related to activities in the fields of genetic materials and genetic engineering which do not conform with the UN Convention on Biological Diversity and Bonn Guidelines or Nagoya Protocol
• Credits related to destroying or encroaching upon important ecosystems such as mangrove forests and conservation areas, for example:
• Natural parks, conservation areas and animal sanctuaries per related public notifications
• UNESCO World Heritage Sites
• Conservation areas under the Ramsar Convention on Wetlands
• Protected areas specified by the International Union for Conservation of Nature (IUCN Protected Area Category) and High Conservation Value (HCV) areas
• Wetlands, swamps or other areas with high carbon stock
• Credits related to destroying or encroaching upon cultural areas, such as archeological sites and cultural heritage sites
• Credits related to violation of human rights, human trafficking, forced labor, illegal migrant labor, child labor or occupational conditions that do not meet related standards
• Credits in support of activities contrary to morality or social norms, such as massage parlors, love hotels, prostitution, pornography, gambling and media related to racism
• Activities believed to have been approved to carry out such operations as procurement, and to receive a concession or license via misuse of public and political office for private gain or bribe, brokerage fee or remuneration in other forms
• Bid bonds for government projects wherein the bidders connive among themselves to allow one of them to win the bids
• Credits related to speculation
• Credits related to arms trade with importing from or exporting to the Socialist People’s Libyan Arab Jamahiriya
• Credits related to manufacturing or trading of weapons of mass destruction, for example:
• Anti-personnel land mines
• Cluster munitions
• Nuclear weapons
• Biological and chemical weapons
• Lethal Autonomous Weapons Systems: LAWS
• Credits for projects in foreign countries that may create extensive environmental and social impacts, and do not comply with the host countries’ environmental requirements or those of related national agencies, as well as other globally accepted standards, such as the Equator Principle, IFC Performance Standards & Environmental, Health, and Safety Guidelines (EHS Guidelines), ADB Safe Guard Policy, JBIC’s Guidelines for Confirmation of Environmental and Social Considerations, EBRD Performance Requirements – Environmental and Social Sustainability (European Standard)
• Credits for hydropower generation from dams that generate significant impacts on the environment and society, without management measures or work plans in accordance with the Equator Principles and without support from international financial institutions for development or foreign financial institutions that have accepted the Equator Principles
• Businesses related to thermal coal², including coal-fired power plants, coal mining, coal trading, and other businesses that utilize funds for purposes related to the coal business or are part of the coal supply chain, such as coal trading, coal mining construction, and coal transportation.
• Exploration, drilling and production Project from unconventional energy sources (Unconventional Oil & Gas)³ and other related businesses (Supply chain and Infrastructure) with unconventional energy sources, such as Tar Sands, Shale Oil & Gas, Arctic Oil & Gas, Deep Water, Ultra-Deep-Water (UDW), and Unconventional Extraction Liquefied Natural Gas.
• Any credits that may adversely affect KBank’s reputation
• Credits related to manufacturing or trading of Tobacco

Note :

1. In terms of “not supporting credit” means not supporting the provision of new credit or the extension of existing credit, whether it is corporate credit lines lending or project and infrastructure financing. This also includes non-supporting services related to debt securities, whether arranging or underwriting.
2. A company considered as a coal company means a company that derives more than 20% of its revenue from coal-related businesses, whether it is direct revenue from thermal coal mining, coal production, coal trading, coal-fired power plants, or from being a supply chain company with more than 20% of its revenue coming from supplying such businesses.
3. A company considered as an unconventional energy exploration, drilling, and production company means a company that derives more than 20% of its revenue from any of the mentioned businesses, including a supply chain company that earns more than 20% of its revenue from supplying such businesses.

Sector-Specific Guidelines

KBank has developed the loan consideration guidelines for specific industrial sectors in accordance with the environmental and social impacts that they create, by including ESG factors in credit consideration for each industry in addition to other factors, to ensure that risk management at the credit portfolio and transaction levels complies with the target to achieve a low-carbon economy, especially for industries with risks of environmental and social impacts. In addition, KBank supports businesses focusing on Good Labour Practices (GLP) and having in place environment management in accordance with international standards.

Power Generation Industry

KBank supports financing to renewable energy plants. If power plant projects under KBank support in other countries may create extensive environmental and social impacts, project owners must comply with the host countries’ environmental and social requirements as well as globally accepted environmental and social requirements and standards. In addition, KBank will consider granting financial support to projects with support from international financial institutions for development or those which accept internationally recognized environmental and social management principles or standards.

KBank does not provide new loans for the following operators :

• Nuclear power plants
• Hydropower plants from dams without management measures and work plans in accordance with the Equator Principles, and without support from international financial institutions for development or foreign financial institutions
• New coal-fired power plants ; KBank will gradually reduce the amount of outstanding loans to coal-fired power plants to zero by 2030. KBank has engaged with all clients in coal-fired power plants business to communicate the commitment to divest our financing from coal-fired power projects.
• New natural gas power plants that do not use low-carbon technology to significantly reduce emission intensity

KBank supports the following operators:

• Renewable energy plants, e.g., solar energy and wind energy
• Power plants using other fuels, e.g., biomass, biogas and waste, with environmental impact assessment in accordance with the business types, information disclosure and greenhouse gas emission plan, monitoring of compliance with measures to prevent and correct environmental impacts, monitoring and examination of environmental quality for the business premises and surrounding communities

Mining Industry

KBank supports mining business operators that passed the green mining standards of the Ministry of Industry, which involve mining with limited environmental impacts and sustainable use of mining resources. The mining processes must reduce the impacts of noise, vibration, contaminated water and particle pollution, with effective dust control solutions for transportation routes and storage systems.

KBank does not support financing to businesses as follows:

• Asbestos mining and businesses related to production or trade of unbonded asbestos fibers
• Mining that pollutes freshwater and marine water resources
• Mountaintop removal mining
• Mining in wildlife sanctuaries
• Mining near UNESCO World Heritage sites
• Mining that pollutes freshwater and marine water resources
• Mining in areas of conflict (border areas, battle zones)
• Thermal coal mining and coal infrastructure, and expansion of existing coal mines
• Provision of corporate finance and coal infrastructure for thermal coal mining
• Provision of corporate finance for thermal coal mining

KBank will gradually reduce the coal mining loan portfolio to zero within 2030.

Oil & Gas Industry

KBank supports businesses with goals and disclosures related to greenhouse gas emissions, and guidelines to alleviate greenhouse gas emissions, due to the fact that the oil and gas industry is a major contributor to greenhouse gas emissions to the ecosystem.

• KBank does not support any exploration or production projects of unconventional resources, e.g., Tar sands, Shale oil and gas, Arctic oil and gas, Deep Water (an energy source at a depth of approximately 1,000 ft or 300m), Ultra-Deep-Water sources (UDW) (an energy source at a depth of approximately 5,000 ft or 1,500m), as well as unconventional extraction liquefied natural gas and pipe construction for transport of such oil.

KBank focuses on provision of loans to businesses as follows:

• Having goals to reduce gas flaring at existing and new assets within a specified timeframe
• Having a plan to monitor or reduce methane emissions at existing and new upstream assets
• Being prepared for prevention and elimination of pollution caused by oil, and having emergency drills to cope with oil spill incidents

Agricultural, Agro-processing and Food Industries, and other Industries Using Agricultural Products as Raw Materials

As agriculture, fishery and forestry exploit natural resources and process agricultural products, KBank is cautious in provision of loans that may be associated with risks and may create negative impacts on the environment or biodiversity, or that may emit air or water pollution, or odors, or wastes from the projects that may affect related communities, or that may emit greenhouse gases, e.g., methane emission from the livestock sector, or nitrous oxide from fertilizers.

KBank does not support financing to businesses as follows :

• Businesses related to destroying natural resources and the environment, and located in sensitive areas, with consideration given to the entire supply chain from raw material procurement to manufacturing and goods distribution, as follows :
  • UNESCO World Heritage sites
  • River basins
  • Forest reserves
  • Natural parks, conservation areas and wildlife sanctuaries per related public notifications
  • Wetlands Registered by Ramsar Convention
  • Wetlands, swamps or other areas with high carbon stock
  • Protected areas specified by the International Union for Conservation of Nature (IUCN)
  • High Conservation Value (HCV) areas
• Plantations that encroach on forest areas or burn crop residues after harvesting. An inspection of land ownership documents is required as part of credit underwriting.
• Exploitation of land acquired illegally
• Exploitation of land where disputes or conflicts exist without having been corrected by those who have been granted the free, prior and informed consent (FPIC) before entering the areas
• Purchases of agricultural goods related to encroachment of forests or burning to prepare plantation areas, e.g., forest burning for maize growing and sugarcane burning for harvesting
• Businesses related to animal hunting and trapping, foraging, charcoal production in forests, and processes of products from animal bones, horns and tusks, plus animals and plants under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), as they involve destruction of natural resources and the environment
• Abattoirs with animal cruelty
• Businesses creating significant impacts on the environment or communities, without proper preventive or management measures
• Illegal treatment of labor

KBank supports financing to businesses as follows :

• Sustainable procurement of raw materials
• Recognition of labor rights and measures to meet minimum labor requirements per related laws
• Awareness of environmental impacts, alleviation of greenhouse gas emissions, reduction of water usage or reuse of water, acceptable standards of wastewater treatment and waste and odor elimination in accordance with regulatory requirements, management of water reuse, reduction of energy consumption or usage of renewable energy
• Environmental management at global standards, e.g., ISO 14001 on environmental systems and ISO 45001 on occupational health and safety

For some businesses that may create impacts on the environment and communities, KBank has established the following sector-specific guidelines :

Livestock (excluding aquatic animals) and Abattoirs

KBank does not support financing to businesses as follows :

• Livestock businesses creating impacts on the environment or communities, e.g., odor pollution and hazardous gases from wastewater; locations must be far from communities and public hearing is required to permit livestock businesses in the areas; an effective biogas system should be in place for wastewater treatment and odor minimization.

KBank supports financing to businesses as follows :

• Consideration of animal welfare, with acceptable standards of animal husbandry, disease prevention, labor and waste management, and community hygiene; farms must be certified with Good Agricultural Practices (GAP) by the Department of Livestock Development (DLD) or other agencies certified by DLD
• Sustainable raw material procurement, with consideration of animal health and labor rights per the Good Labor Practices (GLP)
• Awareness of environmental impacts, alleviation of greenhouse gas emissions, reduction of water usage or reuse of water, acceptable standards of wastewater treatment and waste and odor elimination in accordance with regulatory requirements, management of water reuse, reduction of energy consumption or usage of renewable energy
• Abattoirs’ compliance with the guidelines related to Agricultural Commodity and Food Standards on Good Manufacturing Practices for Abattoirs (ACFS 9004-2547) and other related laws

Aquaculture, Fisheries and Fish Processing

KBank does not support financing to businesses as follows :

• Shrimp farming in mangrove areas.
• Marine fisheries businesses that conduct unlawful operations, with no reporting or control, or Unregulated Fishing (IUU Fishing), or using unlawful fishing equipment, catching restricted animals or animals included in the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).

KBank supports financing to businesses as follows :

• Environmentally friendly farm management that can be tracked through the entire supply chain.
• Appropriate production systems and products per Good Aquaculture Practices (GAP) standards, Code of Conduct (CoC) of the Department of Fisheries, and farm standards of the Aquaculture Stewardship Council (ASC)*
• Sustainable fishery in accordance with international standards of the Marine Stewardship Council (MSC)** that can be tracked through the entire supply chain.
• Use resources derived from fisheries. Processing and output distribution throughout the supply chain, and all processes are in conformity with the related standards. Sustainable sourcing of raw materials and responsible for the environment and society. Use legal workers that are traceable.

*Aquaculture Stewardship Council (ASC) sets certification standards for seafood products from sustainable farming. Every aspect of seafood processing from origin to consumer must be traceable.

**Marine Stewardship Council (MSC) sets certification standards for seafood products from sustainable fishing. Every aspect of seafood processing from origin to consumer must be traceable.

Oil Palm Business

• KBank does not support oil palm plantations that involve deforestation.
• KBank supports operators in complying with the “No Deforestation, No Peat, No Exploitation (NDPE)” policy.
• KBank supports oil palm growers, including those in the supply chain, such as extractors, refiners and traders, in complying with the Roundtable for Sustainable Palm Oil (RSPO) standards. If they have not met the RSPO standards, they should have operational plans in place to ensure a clear certification timeframe.

Forestry and Related Businesses that use Forest Products for the Processing of Pulp, Paper Products and Printed Materials

• KBank does not support forestry that involves deforestation.
• KBank only supports commercial forestry that has been permitted by law and complies with the requirements of forestry organizations such as the Forest Stewardship Council (FSC).

KBank specifically supports businesses that meet sustainability standards, as follows :

• Rubber and related businesses throughout the supply chain, such as growers, traders and processors who comply with the Sustainable Natural Rubber Initiative (SNRI) standards.
• Seafood processing and seafood processing for export that meet the Aquaculture Stewardship Council (ASC) and / or Marine Stewardship Council (MSC) standards.
• Palm oil and related businesses throughout the supply chain, such as growers, traders, extractors and refiners, who comply with the Roundtable for Sustainable Palm Oil (RSPO) standards.
• Soybean oil and related businesses throughout the supply chain, such as growers, traders, extractors and refiners, who comply with the Roundtable on Responsible Soy Association (RTRS) standards.
• Sugar and related businesses throughout the supply chain, such as growers, traders and processors, who comply with the Bonsucro standards.
• Rice and related businesses that meet the Sustainable Rice Platform (SRP) standards.
• Fishmeal and fish oil businesses that comply with the International Fishmeal and Fish Oil Organization Responsible Supply (IFFO RS) standards.
• Wood and related businesses, such as rubber tires, paper packaging and furniture that comply with the standards of the Forest Stewardship Council (FSC), Program for the Endorsement of Forest Certification Scheme (PEFC), Sustainable Forest Management System: Specification Document (SFM) (ISO 14061), Forest Management Standard (FM) (TIS. 14061) and Chain of Custody (CoC) (TIS. 2861).
• Renewable energy and related businesses such as palm and cassava that comply with the Global Bioenergy Partnership (GBEP) standards.
• Biomaterials and related businesses that meet the Roundtable on Sustainable Biomaterials (RSB) certification.
• Agricultural products, such as plant, livestock and fisheries products, that comply with the GAP, Global GAP and Sustainability Assessment of Food and Agriculture Systems (SAFA) standards.

Chemicals, Tanning, Bleaching and other Manufacturing

KBank supports business operators with environment management that meets ISO 14001 standards and that are equipped with occupational safety and hygiene systems per the ISO 45001 standards, as well as minimum labor standards as required by law.

KBank does not support businesses as follows :

• Mass destructive weapons, due to their impacts on the society and the fact that they may trigger crimes.
• Animal-tested cosmetics, because of animal cruelty.
• Businesses that use CFC refrigerants (R11 and R12) (chlorofluorocarbons).
• Businesses that use HCFC refrigerant (R22) (hydro chlorofluorocarbon) unless they have plans to reduce it.

KBank supports businesses that take actions as follows :

• Management of sewage and unused materials; sustainable management of metal scraps through economic value added reproduction.
• Reduction of air pollution from production processes, such as sulfur dioxide and carbon dioxide, including other pollutants, such as heat, noise and vibration.
• Having operational plans to comply with or that meet the ISO 14001, ISO 45001 and SA 8000 standards.

Real Estate Industry

• KBank promotes building construction and renovation that meet energy efficient and environmentally friendly standards such as LEED and TREES.
• For low-rise housing projects, KBank supports those focusing on energy efficiency, with the design and use of materials and structural systems in line with the principles of energy-saving homes adopted by the Department of Alternative Energy Development and Efficiency, Ministry of Energy or No. 5 Home Development Project initiated by the Electricity Generating Authority of Thailand (EGAT) in collaboration with the Department of Alternative Energy Development and Efficiency, Ministry of Energy.
• If the projects applying for financing are classified as one of nine types of building, namely educational institutions, offices, shopping malls, administrative facilities, entertainment venues, public facilities, hospitals, hotels and condominiums, with the total space of more than 10,000 square meters, related developers must meet the conditions of the Ministry of Energy’s two announcements or the BUILDING ENERGY CODE 2020 (BEC).

Construction Materials Industry

KBank does not support financing to businesses as follows :

• Construction of new plants where production processes use thermal coal as the main energy source.
• Construction of steel mills where raw materials used in induction furnace (IF) process are the result of natural resource destruction such as deforestation, mountaintop removal, etc.
• Production processes or production sites that affect the environment or surrounding communities.

KBank supports financing to businesses as follows :

• Businesses with certified Energy Management System (ISO 50001), Environmental Management System (ISO 14001), Occupational Health and Safety Management System (TIS 18001), as well as the 1101-1106 standards of the Department of Public Works and Town & Country Planning that determine specifications of construction materials used in building structures.
• Improvement of production processes by replacing coal with clean energy, adopting technologies so as to upgrade and enhance production efficiency, while reducing energy consumption.
• Steel manufacturing businesses planning to change production processes from induction furnace (IF) to electric arc furnace (EAF), and Portland cement businesses planning to produce hydraulic cement.
• Usage of environmentally friendly raw materials, with procurement based on the circular economy concept, and energy-saving construction materials.
• Awareness of environmental impacts, alleviation of greenhouse gas emissions, reduction of water usage or reuse of water, management of water reuse, reduction of energy consumption or usage of renewable energy.
• Products that are certified with Green Labels from the Thailand Environment Institute.

Automotive and Parts Industry

• KBank focuses on providing credit support to businesses in the supply chain of parts and equipment manufacturing for electric vehicles, electric cars, smart electric charging system development, battery electric motorcycles, battery electric tricycles, electric buses and battery electric trucks.
• KBank adopts a cautious approach in providing credit support to powertrain and engine manufacturers, considering the risk that internal combustion engine vehicles will be replaced with electric vehicles in the future. Additionally, to comply with the country’s target to achieve a low-carbon economy, operators must meet environmental management standards such as Green Industry (GI), ISO 9001 and ISO 45001, while also having development plans in place to be qualified for the Euro 5 emission standards, namely TIS 3016-2563 and TIS 3018-2563, that will be enforced in 2024 onwards.

Transport Industry

Marine Transport

KBank will support financing to the maritime businesses as follows :

• Compliance with the International Maritime Organization (IMO) standards under the Safety Of Life At Sea (SOLAS) and the Maritime Regulations for Prevention of Pollution (MARPOL) conventions.
• All cargo ships on international voyages are required to carry a maritime labour certificate issued by the International Labor Organization (ILO) and International Maritime Organization (IMO). The Maritime Labor Convention (MLC) sets standards for employment conditions and onboard accommodation, as well as minimum employment requirements, medical treatment and others.
• Cargo ships of operators must be inspected by the International Association of Classification Societies (IACS) - an organization that certifies standards for construction, operation and maintenance of the ships in compliance with the IMO conventions. KBank must be able to verify whether the ships are qualified for the standards under the IMO conventions and are audited by the IACS.

However, such businesses should also set goals and guidelines for reducing greenhouse gas emissions. This is because the maritime sector plays a significant role in releasing greenhouse gases such as sulfur into the ecosystem.

Air Transport

• KBank will support businesses that comply with the laws and regulations imposed by each country.
• Aviation businesses can comply with measures established by the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) in each country, while also setting environmental goals that are in line with those of the International Civil Aviation Organization (ICAO).
• Businesses should have plans to increase sustainable aviation fuel (SAF) usage, which can reduce carbon emissions throughout the fuel life cycle when compared to traditional jet fuel.

Land Transport

• KBank focuses on supporting businesses that are certified by the Q Mark standard from the Department of Land Transport, or that comply with regulations under the Q Mark standard, while planning to improve operational efficiency and quality in accordance with the standard guidelines.

Service Industry

KBank does not support businesses as follows :

• Businesses related to service places that are subject to the law on service places, entertainment venues, businesses contrary to morality and social norms such as massage parlors, motels, coyote clubs, pubs, bars, nightclubs, etc.
• Businesses related to casinos or gambling and racecourses, as they have negative impacts on society.
• Hotel and resort businesses that encroach on forest areas or are located in forest reserves. If applicable, they are required to prepare and submit an Environmental Impact Assessment (EIA) report. KBank supports only projects that are officially EIA-approved.
• Service businesses that use illegal labour, slave labour, or child labour, or do not have occupational health and safety measures for workers.