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Sustainable Development Policy Target Sustainable Finance Report

Responsible Lending and Investment: ESG Credit and Investment


Environmental and Social Risk Management Policy and Framework (ESRM) incorporates ESG considerations 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, 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.

The Bank shall regularly review and improve its ESG risk consideration policy and criteria as well as its credit underwriting to be in line with social and environmental concerns. The Bank has incorporated ESG into its Know Your Customer (KYC) and Customer Due Diligence (CDD) processes to ensure operational efficiency.



Project Finance
KBank integrates Environmental and Social Risk Management into its project finance credit assessment process in alignment with the Equator Principles (EP), through a structured Environmental, Social, and Governance (ESG) due diligence framework. The Bank acknowledges its responsibility to mitigate potential environmental and social impacts arising from its financing activities. All project finances are required to comply with applicable environmental laws and regulations, including Environmental Impact Assessments (EIA) and Environmental Health Impact Assessment (EHIA).
Projects are categorized into three risk levels, Project Finance Type A, B, and C, based on the scale and severity of their potential environmental and social impacts. 
For Type A projects, which pose significant ESG risks, the Bank conducts enhanced due diligence that includes environmental and social impact assessment, safety and emergency response plans, action plans, community consultation, stakeholder engagement, grievance mechanisms, and information disclosure to address concerns from stakeholders including local communities, workers, and NGOs. Independent environmental and social consultants are engaged to review environmental and social information. Bank requires project finance to comply with our ESG requirement. For projects that may create extensive environmental and social impacts (e.g, hydropower generation from dams, projects in foreign countries, etc.), independent consultants or third-party experts are appointed to ensure that the projects are carried out in accordance with EP, the relevant regulations and laws to prevent any adverse impact on the environment and community members’ quality of life. The example list of advisors include AFRY, WSP Global, Emergent Ventures Inter, Shaw’s Stone & Webster, and Greener Consultant etc. 
For medium and lower-risk projects (Types B and C), a General ESG Screening Form is used to evaluate ESG risks and management approaches. ESG considerations are integrated into credit decisions to ensure responsible and sustainable financing.
The application for project finance must be in line with the credit policy elaborated below.
  1. Checking the industry type against the Exclusion Listst
  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
  3. (Only Type A Projects) Requesting approval of heads of business divisions and Enterprise Risk Management Division for detailed study of the projects (without approval, the processes terminate)
  4. (Only Type A Projects) 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


Capacity Building in Environmental and Social Risk Management 
Due to the complex risks associated with project finance, it is essential that KBank staff possess an understanding of environmental and social (E&S) risks, along with the ability to assess specific risk issues. To strengthen internal capacity, KBank has established the “Climate Transition Capacity-Building Project” to equip employees with knowledge on green loans, green buildings, and climate change risks through training sessions. These sessions provide in-depth training on environmental and social risk management based on the IFC Performance Standards, which play a key role in risk identification for project finance. The training covers various aspects of E&S risk management, including risk identification, impact assessment, the development of Environmental and Social Management Systems (ESMS), and action plans to address potential adverse impacts. All topics are designed to support the integration of E&S considerations into the Bank’s risk management processes.

In addition, KBank is committed to investing in alignment with sustainable development principles and its Net Zero commitment. To support this, as part of KBank investment policy, it is required that all active, passive and third-party manage investments must comply with applicable laws, regulatory requirements, and KBank’s internal strategies and policies. This includes alignment with the Bank’s Credit Policy on Environmental, Social, and Governance (ESG) factors, ensuring that investment decisions are consistent with KBank’s broader ESG objectives​

Read more in KBank's Sustainability Report 2024 Chapter Responsible Lending and Investment: ESG Credit and Investment

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


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