Responsible Lending and ESG Considerations

Krungsri continues to act with the spirit and responsibilities of a Domestic Systemically Important Bank (D-SIB) serving as a financial intermediary in fundraising and financial resource allocation for supporting commercial and retail customers, including the socio-economic system, the undertakings of which may create both direct and indirect impacts on society and the environment.

In this light, Krungsri place great importance on the provision of financial products and services that take into account environmental, social, and governance (ESG) dimensions parallel to the economic dimension, in alignment with responsible lending principles. In addition, the Bank aims to create positive outcomes through supporting businesses or transactions that create value for and benefit society and the environment over the long term, thus boosting employment and leading to income generation, and socio-economic development, including development of innovations and technologies. We are also committed to promoting a low-carbon economy and society by supporting businesses that are environmentally-friendly.

In addition, adhering to responsible lending principles with ESG consideration will not only help prevent financial, operational, reputational, and regulatory risks, but also support businesses and society toward sustainable development and growth.

Management Approaches

• Become an official signatory of the Principles for Responsible Banking (PRB) of the United Nations Environment Programme Finance Initiative (UNEP FI), reflecting Krungsri’s unwavering determination to follow sustainable banking guidelines.
• Adhere to Sustainable Banking principles by focusing on Responsible Lending guidelines, under which credit underwriting takes account of ESG dimensions along with the economic dimension, prioritizing borrowers’ debt affordability. In this regard, Krungsri established the Policy for Market Conduct and Responsible Lending as a guideline for employees of credit underwriting functions to strictly adhere to.
• Comply with the “Know Your Customer” (KYC) and “Customer Due Diligence” (CDD) principles to ensure that the Bank’s funds are not used to support, promote, or engage in any misconduct or create any negative impact on society nor the environment.
• Establish “the Policy and the Procedure for Credit Risk Management” which serve as the criteria and guidelines for managing credit risks. This covers loans, investments, contingent liabilities, credit-like transactions, hedging against foreign exchange risk and interest rate risk, and financial derivatives for all customer segments. The policy is communicated to the relevant officers for acknowledgement and strict adherence and for encouraging participation in maintaining the standards on credit risk underwriting and management. Also, emphasis is placed on raising the relevant parties’ awareness of ESG risks in the credit underwriting process. In this regard, the Bank reviews the policy annually or upon any significant change to ensure that the Bank’s credit underwriting is in line with the ever-changing business environment. Taking into consideration ESG dimensions as follows:
  • Environmental dimension: Greenhouse gas (GHG) emissions and climate change, deforestation and biodiversity loss, water stewardship, air/soil pollution and contamination, impact on ocean health, hazardous material and waste management.
  • Social dimension: Human rights, labor rights, occupational health and safety, community relations and community rights, excessive household debt, stakeholder engagement.
  • Governance dimension: Corporate ethics and integrity, business conduct, anti-corruption, risk management, monitoring, reporting and transparency
• Establish the “Policy for Sustainability Lending” which serves as the guideline for granting loans while giving attention to ESG risks and aspiring to create positive outcomes for society and the environment. In addition, employees of all related business units must adhere to this policy and consider ESG risks for prudent credit underwriting.
  Policy for Sustainability Lending
   

  Policy for Sustainability Lending

  PDF
• Establish the “ESG Center of Excellence” under the Corporate and Investment Banking Group. Responsible for addressing customer needs in ESG finance, the center’s operations strategy is as follows:
  • Leverage MUFG’s expertise and network to share knowledge and offer ESG expertise, which is Krungsri’s and MUFG’s forte.
  • Encourage customer engagement from the start to raise financial awareness in ESG-related dimensions and help customers kickstart their sustainability transition.
  • Communicate the advantages of access to ESG funds compared with other types of funding by pointing out the necessity and benefits of sustainable finance.
  • Underline Krungsri’s standpoint in offering total financing and hedging solutions with comprehensive components encompassing ESG considerations, ranging from ESG lending, bonds, to debentures, including aligned hedging strategies.