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 67 66 ENVIRONMENTAL STEWARDSHIP Strategy At Kenanga, we integrate climate-related risks and opportunities into our business strategy ensuring that climate considerations are embedded into our long-term decisions. This allows us to assess and respond to the impacts of climate change on our operations, investments, and value chain. Climate risk management is a key component in our Kenanga’s ESG Framework and Sustainability Roadmap 2023-2025 under the Environmental Stewardship pillar. In 2024, we strengthened our approach by implementing BNM’s CRMSA and initiating Climate Risk Stress Testing, enhancing our ability to manage and mitigate climate-related risks. We developed a Decarbonisation Roadmap to guide our overall strategy inmanaging and reducing our GHG emissions. The implementation of this Roadmap will also be complemented by the upcoming Group Responsible Investing Framework to further guide decision-making for investment activities. Short-Term (1 to 5 years) Mid-Term (5 to 10 years) Long-Term (> 10 years) Scope 1 (Direct Emissions – Fleet) Transition to low-emission vehicles and optimise fleet operations to reduce fuel consumption. Explore options to expand the use of electric vehicles (EVs) across the fleet. Aim for a fully electric fleet to ensure zero emissions from the Group-owned vehicles. Scope 2 (Indirect Emissions – Electricity) Review and enhance current energy-efficient technologies to reduce electricity consumption. Explore options to increase the renewable energy mix in electricity sourcing. Shift to 100% renewable energy sourcing for all electricity needs across operations. Scope 3 (Value Chain Emissions – Categories 6, 7,15) Promote sustainable business travel policies and encourage eco-friendly commuting options for employees. Engage with suppliers and clients to develop transition plans and reduce emissions through low-carbon solutions and collaborations. Monitor reduction targets in value chain emissions by targeting high-emitting sectors and scaling sustainable practices across the entire supply chain. Approach to Residual Emissions Explore utilising carbon offsetting mechanisms to offset residual emissions. Kenanga’s Decarbonisation Roadmap We are dedicated to managing our portfolio and operational emissions to support the transition to a low-carbon economy. Our decarbonisation approach focuses on mitigating climate-related risks and leveraging decarbonisation opportunities to create shared value for our stakeholders. The Approach STRATEGIC PILLAR 1: Emissions Management Manage and reduce GHG emissions footprint through clear strategies and continuous monitoring. Optimise energy use, adopt renewables, and enhance sustainability across operations. Partner with stakeholders to accelerate sector-wide climate action. Integrate climate considerations into investment and lending to drive portfolio decarbonisation. STRATEGIC PILLAR 3: Operational Efficiency STRATEGIC PILLAR 2: Strategic Partnerships STRATEGIC PILLAR 4: Climate Resilience Levers to Decarbonisation Key Enablers Enhance data collection, analysis, and reporting capabilities Adopt advanced technologies and innovative solutions Engage and enable suppliers, clients, and partners Capacity Building Integrating the Impact of Scenario Analysis and Stress Testing into Strategic Planning To meet regulatory expectations and identify risk exposures at Kenanga, we have embarked on the Climate Scenario Analysis and Stress Testing exercise in 2024. This exercise incorporates both bottom-up and top-down approaches to evaluate climate risk impacts. In the bottom-up assessment, climate-related variables are integrated into counterparty financial statements, highlighting the key areas affected. The top-down assessment, on the other hand, leverages climate-related Macro-Economic Variables (“MEVs”) and sector-specific Gross Value Added (“GVA”) data from BNM to assess broader sectoral impacts. This dual approach ensures that climate risks are thoroughly evaluated across various portfolios while addressing the complexities and limitations of data and forecasting. The Climate Scenario Analysis and Stress Testing process includes the following steps: In addition, we have begun embedding the lens of climate risks into our non-credit risk types, including market risk and operational risks, adopting a qualitative approach for assessing these categories. The results will complement the quantitative analysis. The limitations observed from this exercise include data availability and quality, which affect the overall quality of the outcome. In addition, climate risk stress testing remains a nascent and evolving field in the industry. As methodologies continue to develop and industry practices evolve, there is significant potential to further enhance results and analysis for greater accuracy and reliability. The findings from the climate scenario analysis and stress testing are currently being finalised. The outcome of this exercise will provide an overview of Kenanga’s climate risk exposure at the portfolio level and offer guidance for strategic decision-making considering the nature of our business. Baselining of Our Financed and Facilitated Emissions At Kenanga, we are committed to measuring and managing our financed emissions as part of our climate strategy. Guided by frameworks such as the Partnership for Carbon Accounting Financials (“PCAF”) and GHG Protocol, we aim to align with national climate goals. In 2024, we prioritised the baselining of our Scope 3 - Category 15 Investments (financed and facilitated emissions) across both on-balance sheet and off-balance sheet activities as key metrics for our net zero journey. This included measuring emissions from our lending and investment portfolios using the best available data, despite some limitations. These efforts not only guide our business strategies but also help us to identify data and process gaps to enhance our climate initiatives. Scope 3 Financed and Facilitated Emissions - The Process Defined the scope and boundaries, including the asset classes or products to be covered. Estimated and allocated clients’ or investees’ emissions using in-house Excel-based calculators, while assigning a data quality score. Collected data points (e.g., Enterprise Value Including Cash (“EVIC”), floor area, reported emissions) from internal and external sources, ensuring thorough data validation. Analysed and interpreted financed emissions performance of sectors, asset classes and clients or investees. 1 2 3 4 ENVIRONMENTAL STEWARDSHIP Scenario Setting Data Collection and Preparation Portfolio Segmentation Bottom-up and Top-down Assessment Results and Analysis 1 2 3 4 5
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