• Climate Risks at the Transactional Level (Including upon origination and extension of credit) In assessing the climate risk of a transaction, BIMB conducts due diligence of the potential use of proceeds of a new or existing financing facility. The use of proceeds may be tied to certain GPs based on the climate impact of the economic activity. • Climate Risks at the Entity Level (Including an overall assessment of a business customer’s sustainability policies, action plans, implementation of sustainability roadmaps, and issues or incidents related to ESG) In assessing the climate impact of a business entity, we assess the customer’s disclosures including, but not limited to, the following:̵ Sustainability Policies̵ Sustainability Roadmaps̵ Certification and Third-party Verified Action Plans̵ Carbon Emissions Reporting and Reduction Targets̵ Grievances and Complaints related to the Entity/ Group The assessment is conducted based on industry-specific norms and standards, especially pertaining to certification but also including ESG action plans that address the industry-specific impacts of the company’s activities. The assessment enables the Bank to obtain an overview of the climate impacts of the customer in terms of GP1, 2 and 3 and any remedial activities the customer carries out in terms of GP4. 5 Initiating Climate Scenario Analysis & Stress Testing We are guided by climate scenarios provided by the Network for Greening the Financial System (NGFS) to explore how climate change risks and opportunities may affect our business over time. Scenario Analysis Physical Risks (Extreme weather events, gradual climate change) Transition Risks (Policy, technology, consumer preferences) Business disruption Productivity loss Lower value of stranded assets Asset destruction Reconstruction / replacement Increase in energy prices Economy Financial Impacts Risk Metrics Cash flows and business risk Impacted by physical and transition risk Credit Risk Spreads, etc PD/LGD, Internal Rating, Expected Loss, Spreads, etc Capital/Collateral/Risk Premium Impacted by change in asset valuation Portfolio Impacts Concentration and correlation risk, VAR and Tail Risk Integrated Report 2022 152 Good Governance
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