KBank has formulated an Environmental and Social Risk Management Policy and Framework (ESRM) that incorporates ESG consideration into the risk management processes via an operational structure of well-defined roles and responsibilities. International practices have been adopted in our credit underwriting processes for corporate credits and Project Finance, and debt securities investment. Customers have been notified of sustainability-related opportunities and risks. An Exclusion List has been established for projects that are ineligible for KBank credits, along with a Sector-Specific Guideline and intensive risk management measures for high-risk customers. The credit underwriting process is closely monitored and examined by specialists to ensure that it is in conformity with international standards, and KBank’s financed portfolio has implemented efficient environmental and social impact management to foster stable business advancement and sustainable returns for all stakeholders in the long term.

KBank has developed low-carbon products and supported green loans, which have been set as a KPI of management and related units. We also set long-term goals for reduction of greenhouse gas emissions from our own operations. We have also presented awards, both monetary and non-monetary, to employees in recognition of their development of ESG projects.

KBank has recognized the importance of the potential impacts of our credit activities. Our credit policy has placed an emphasis on management of ESG impacts that may be incurred from our customers or projects financed by KBank’s credits, as follows:

Environmental aspect
Consideration of credit for applicants or enterprises that operate businesses or projects that may be associated with risks to and create impacts on the environment and natural resources, such as water resources, forests and biodiversity

Social aspect
Consideration of credit for applicants or enterprises that operate businesses or projects that may be associated with social risks, such as exploitation of illegal labor, or create impacts on communities’ living conditions and ways of life

Governance aspect
Consideration of credit for applicants or enterprises that may operate businesses that do not comply with the good corporate governance principles, requiring consideration of responsibility for all stakeholders and avoidance of fraud or corruption

Credit Consideration Processes in accordance with ESG Factors
To ensure that KBank’s support is provided for projects that do not create environmental, social, and governance impacts, KBank’s relationship managers employ environmental and social screening tools for commercial credits of medium business and corporate customers, and Project Finance. Credit applications are examined in compliance with the credit policy, as follows:

Commercial Credits for Medium Business and Corporate Customers

1. Checking the industry type against the Exclusion List
2. Assessing ESG impacts via General ESG Screening Form
3. Approving or rejecting the applications in accordance with the delegated authority, and determining environmental and social conditions

Project Finance

1. Checking the industry type against the Exclusion List
2. Classifying the credit application types for projects that may create environmental or social impacts, based on global principles and notifications of the Ministry of Natural Resources and Environment
   Assessing ESG impacts via the initial ESG risk assessment form to be delivered to responsible officers for assessment of project management
3. Requesting approval of heads of business divisions and Enterprise Risk Management Division for detailed study of the projects (without approval, the processes terminate)
   
4. Reporting to the Corporate Governance Committee for recommendations
5. Studying details and negotiating about project feasibility in terms of credit and environmental management
6. Approving or rejecting the applications in accordance with the approval authority, and determining environmental and social conditions

Examples of ESG Credit Assessment to Project Finance
KBank’s credit consideration includes ESG criteria and KBank’s credit policy in the processes. Examples of Project Finance are as follows:

• Solar Power Generation Project
  The solar power generation project serves as a pivotal tool for transitioning the private sector towards a zero-carbon society, supporting Thailand's greenhouse gas emission reduction goals. The Bank's evaluation of solar power generation projects and solar rooftop installations on buildings of clients and their associate companies includes assessments of risks and ESG impacts alongside credit considerations. Key factors considered include proper permitting for building construction and/or modification, and specialized qualification of contractors conducting installation and maintenance of the system. The project contributed to mitigating climate change through reduced greenhouse gas emissions and sustainable electricity generation.

• Solar Panel Manufacturing Support Project
  Due to global efforts to decrease impacts from greenhouse gas emissions by promoting generation and consumption of renewable energy, there are accelerating demands for solar panels. The Bank supports solar panel manufacturing projects by evaluating ESG factors related to production processes, management practices, and adherence to production standards. This approach ensures minimal environmental and social impacts towards employees and the local communities while fostering an ecosystem conducive to solar energy usage, promoting sustainable energy use.

• Underground Power Line System Support Project
  Aligned with government transportation and communication infrastructure development policies for both the public and the private sector, the Underground Power Line System project which bring overground power lines along sky train and metro routes underground will enhance electricity distribution stability and promotes societal benefits in the vicinity of the project area such as improved safety and aesthetic enhancements. However, as the project entails potential environmental and social risks during construction, therefore the Bank evaluates multiple factors as part of project finance assessment including suitability of potential contractors based on expertise, experience, and past performance; suitability and comprehensiveness of project management plan; rigorous selection and procurement of equipment from qualified suppliers; as well as establishment and implementation of robust security measures for on-site personnel.

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