KENANGA INVESTMENT BANK BERHAD SUSTAINABILITY REPORT 2024 BASIS OF THIS REPORT OUR APPROACH TO SUSTAINABILITY KENANGA AT A GLANCE GOOD GOVERNANCE LEADERSHIP STATEMENTS SUSTAINABLE ECONOMIC GROWTH ENVIRONMENTAL STEWARDSHIP EMPOWERING PEOPLE AND COMMUNITIES APPENDIX 65 64 Approach to Managing Climate Risks We take a proactive approach to climate risk management at both the business and enterprise levels, supporting our customers’ climate transition while safeguarding the Group’s long-term sustainability. This approach also ensures alignment with evolving market expectations and regulatory requirements. We implemented the following key measures: Identifying Rising Opportunities in Managing Climate Risks By understanding the potential opportunities through our climate risk identification process, we can align our strategies to benefit from these opportunities, whether they relate to new products, services, or markets. This helps us stay competitive, enhance our sustainability efforts, and create long-term value for the company and stakeholders. As we refine our climate risk management practices, we will further assess and refine the identified opportunities over the specified time horizon (short, medium, and long-term). Example of Potential Opportunities & Impacts Opportunity Type Opportunity Description Impacted Areas Financial Impacts Green Financing & Sustainable Investment Increased demand for green financing solutions (e.g., renewable energy projects, ESG investments). Advancing financial solutions focusing on climate resilient infrastructures. • Increased loan portfolio diversification • Enhanced reputation • Revenue growth from ESG products Carbon Credit & Offsets Developing carbon credit trading mechanisms and financing carbon offset projects. Heightened focus on sustainable agriculture and forestry for carbon markets demand. • New revenue stream from carbon trading • Stronger compliance with carbon reduction mandates Resilient Infrastructure Financing Investment in flood-resilient infrastructure and adaptive urban planning to mitigate physical climate risk. Increased public-private partnership for sustainable city developments. • Loan demand growth in infrastructure sector • Improved asset quality for real estate-backed loans Green Bonds & SustainabilityLinked Loans Issuing green bonds and providing incentives for clients adopting sustainability strategies. Attracting institutional investors and corporate clients seeking for ESG-linked investments. • Stronger capital market positioning • Higher investor demand Technology-Driven Climate Solutions Investment in fintech solutions to support climate risk modelling and ESG reporting. Increased adoption of AI-driven climate risk analytics and investment tools. • Operational efficiency gains • Enhanced risk management Note: Please note that the above examples are intended as preliminary identified opportunities and will be further reviewed for their relevance to Kenanga. Moving Forward Effective management of climate-related risks is essential for achieving our net zero commitment by 2050, in line with the national climate ambition. We will continue integrating climate considerations into our risk management framework to enhance resilience and support long-term value creation aligned with regulatory and stakeholder expectations. In 2024, our focus was on completing a scenario analysis, refining risk metrics and targets, and improving climate-related disclosures to enable more informed decision-making and risk mitigation. Beyond regulatory compliance, we will further embed climate risk considerations into our operations by aligning with global standards such as IFRS S1 and S2. This will enhance transparency, improve climate-related financial disclosures, and support more effective risk assessments, reinforcing our commitment to prudent and forward-looking climate risk management. Looking ahead, we will deepen our focus on client engagement, offering sector-specific support that promotes sustainable transitions. Leveraging our existing assessments (e.g., RAC and EDD), we aim to create more avenues to help clients navigate their journey towards more resilient and climate-conscious strategies. This approach reflects our dedication to responsible investment and proactive climate engagement. Key Policies and Frameworks • Established a robust climate risk governance structure to oversee all climate-related matters within the organisation. • Integrated climate risk into the Enterprise Risk Management (“ERM”) Framework, ensuring that both enterprise-level and business-level risks are systematically identified, assessed, and managed. The respective risk frameworks have also been updated to include climate risks considerations. • Enhanced the Climate Change Risk Management Framework (“CCRMF”) to embed climate change-related risk considerations into governance processes, business strategy and operations, reporting and disclosure, as well as the risk management system. • Developed a Decarbonisation Roadmap aligned with our goal to achieve net zero emissions by 2050, addressing Scope 1, Scope 2, and Scope 3 GHG emissions. • Enhanced the Group Outsourcing Risk Management Framework (“GORMF”) and Procurement Framework to include climate risk considerations when evaluating third-party service providers to ensure that the environmental and climate risk profiles of outsourced partners or suppliers are considered and any potential indirect risks to the organisation are mitigated. Capacity Building and Resource Planning • Conducted awareness and training sessions to guide internal stakeholders in assessing climate risk exposure and engaging clients on climate expectations. In addition, we monitored and provided monthly updates to Risk Committees on clients’ climate profiles based on CCPT ratings and sectoral exposure. • Regularly monitored and compiled local and global developments on the climate landscape that may potentially impact KIBB and our clients. • Increased headcount in managing climate risks, while building competency through targeted training and certifications in climate risk management to ensure a well-equipped team capable of addressing climate risks. Monitoring and Reporting • Committed to refraining from providing new financing/ lending to potential clients that are not within our risk appetite. • Scope 3 - Quantified our financed and faciltated emissions by sectors. Appropriate risk and metrics shall be developed based on the results. • As of 31 December 2024, we have adopted the updated CCPT classification categories into our assessments of our private equity investments, corporate loans and bonds. Our exposure in C1, C3 and C5(b) totalled RM119.2 million, RM151.2 million, RM403 million, respectively. Risk Assessment Tools • Developed a tool to guide the identification and classification of climaterelated risks as part of the climate risk assessment process, including the Climate Change Risk Assessment Checklist (“RAC”), Enhanced Due Diligence (“EDD”), and the Climate Risk Assessment Template. • Updated the Risk Appetite Statement to reflect the integration of climate change risk, setting clear boundaries for the level of risk the organisation is willing to take on with respect to climate-related risk factors. • Conducted climate risk stress testing and scenario analysis exercises as per BNM’s guidelines to identify and assess the impact of climate risk at both portfolio and sectoral levels across different scenarios and developed appropriate strategies for the business accordingly. • Incorporated physical risk assessment for our offices (Headquarters and branches) into the existing Operational Risk Self-Assessment (“ORSA”) and the risk assessment by Business Continuity Management (“BCM”). ENVIRONMENTAL STEWARDSHIP ENVIRONMENTAL STEWARDSHIP
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