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 69 68 Scopes and Boundaries Coverage Scope Operational Market Malaysia (Asset Wealth Management, Kenanga Private Equity, Corporate Islamic Banking, Debt Capital Market, Equity Capital Market and Treasury). Financed Emissions Listed Equity and Corporate Bonds Includes all on-balance sheet listed corporate bonds and all on-balance sheet listed equity that are traded on a market and are for general corporate purposes. Business Loans and Unlisted Equity Includes all on-balance sheet loans and lines of credit to both listed and unlisted businesses, nonprofits, and any other structure of organisation and are for general corporate purposes. Project Finance Includes all on-balance sheet loans or equities to projects or activities that are designated for specific purposes, designated for a defined activity or set of activities, such as the construction and operation of a gas-fired power plant, a wind or solar project, or energy efficiency projects. Facilitated Emissions Facilitated Equity and Debt Investments Includes all facilitation of primary off-balance sheet equity and debt instruments by KIBB on behalf of clients. For example, we help our clients to become publicly listed by supporting them through the Initial Public Offering process. GHG Scope Includes Scope 1 and 2 emissions from counterparties. Note: Financed emissions are the emissions generated by the activities of companies or projects we directly invest in or lend money to, such as funding a coal mining company. Facilitated emissions, on the other hand, refer to emissions that result from our financial services, such as issuing bonds, which support high-emission activities, even if we’re not directly funding them. Essentially, financed emissions come from what we directly support, while facilitated emissions stem from the broader financial services we provide that enable such activities. All GHG emissions resulting for our investment activities, covers from 1 January to 31 December 2023. Calculation Approach and Limitations Attribution Factor Emissions from financing and investing activities are generated by third-party counterparties to KIBB and it falls under Scope 3. The Group is responsible only for the portion of the counterparty’s emissions related to our financing activities. Therefore, the Group references the PCAF, which uses an attribution factor methodology that allocates counterparty emissions to a financial institution based on the relative value of the company, project, real estate, or motor vehicle linked to the financing. Financed Emissions Financed emissions are calculated based on guidance from PCAF which defines how financial institutions should account for their Scope 3 Category 15 Investments emissions. Our model estimates counterparty emissions and attributes a proportion of these emissions (through the attribution factor) to KIBB depending on the extent of financing provided to the counterparty. Specific calculations vary by asset class and sector, and guidance is provided on how to aggregate emissions intensities. Facilitated Emissions Facilitated emissions from the primary issuance of capital market instruments can be calculated in several ways, depending on the availability of financial and emissions data specific to the issuing company. The facilitated emissions were determined using an economic activity-based approach, in accordance with the PCAF Standards Part B - Facilitated Emissions, a new guide which was released in 2024. Data Limitation Accurate calculation of financed emissions in lending and investment portfolios requires high-quality data, including GHG emissions information for the underlying investee and borrowing companies. Companies that measure and publicly report their emissions contribute to the availability of high-quality data. However, the Group’s data is currently limited due to the lack of granular and sub-sector-specific customer data, as many customers and investees within the Group’s portfolio have yet to measure and report their GHG emissions. The PCAF Standard acknowledges these challenges and offers methodologies for calculating both financed and facilitated emissions using different approaches, each with varying levels of data quality depending on the estimates involved. In line with the PCAF Standard’s calculation methodology, the Group has estimated our financed emissions using the best available data. This includes leveraging sectoral and sub-sector data as proxies to measure the absolute financed emissions, while also accounting for facilitated emissions from the primary issuance of capital market instruments. The Group is committed to continuously refining our emissions estimates by enhancing our calculation methodologies and improving data quality. Additionally, we will focus on improving our processes for gathering actual emissions data from our customers and investees to support more accurate reporting and future calculation. Moving Forward The baseline exercise on financed emissions has provided us with a clear understanding of the Group’s total GHG emissions from investment activities. This allows us to assess emissions across sectors, enhance our emissions inventory, and inform our decarbonisation strategy. The insights from the Climate Scenario Analysis and Climate Stress Testing will further shape our data strategy to ensure we collect necessary client information. Following BNM’s release of the Climate Risk Stress Testing methodology in early 2024, we are refining our risk models and conducting further evaluations to integrate these insights into our risk management frameworks and decision-making processes. We will continue enhancing our climate risk scenario analysis to align with changing regulations and market expectations. This includes refining our objectives, incorporating physical and transition risks, and expanding scenario coverage to guide strategic planning, risk management, and stress testing. We will also explore opportunities for sustainable financing and low-carbon investments, while improving the accuracy of our risk mitigation strategies. Through continued collaboration and innovation, we will work towards reducing our carbon footprint and supporting the transition to a low-carbon economy. For more information on the outcome of the baseline exercise, please refer to pages 73 to 76 of this Report. Metrics and Targets Our strategy focuses on managing and reducing GHG emissions across our operations, products, and services. We are committed to efficiently managing natural resources throughout our value chain to minimise the environmental impact of our activities and protect ecosystems and biodiversity. Key Metrics and GHG Data Methodology We continuously monitor our electricity and fuel consumption to identify opportunities to improve on energy efficiency. Our Scope 1 emissions stem from the fuel consumption of company-owned vehicles, while Scope 2 emissions are calculated based on electricity consumption at Kenanga Tower and branch offices. For Scope 3, we employ a spend-based method to assess business travel emissions and have expanded our reporting to include employee commuting using a distance-based method. Additionally, a new area we now account for in our GHG inventory is Category 15 – Investment (financed and facilitated emissions), based on the economic activity-based approach. The following sections outline our energy use and GHG emissions data. ENVIRONMENTAL STEWARDSHIP ENVIRONMENTAL STEWARDSHIP
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