The ESG Credit Policy identifies the approach and general principles of Banca Popolare di Sondrio Group in the integration of environmental, social and governance factors into the loan origination and monitoring process.
The 2022-2025 Business Plan defines specific sustainable actions and introduces, in accordance with European 'sustainable finance' regulations and market trends, objectives to integrate ESG factors into all major credit processes and procedures.
Legislation and reference principles
The Policy is structured according to the principles of sustainable finance, outlined at EU and national level by regulations and guidelines, including:
- Consolidated Law on Financial Intermediation (Legislative Decree No. 58 of 24 February 1998);
- European Central Bank, “Guidelines on loan origination and monitoring (2020)”;
- European Central Bank, “Guide on climate-related and environmental risks (2020)”;
- Regulation EU 852/2020 on the establishment of a framework to facilitate sustainable investments and amending Regulation (EU) 2019/088 (so-call Taxonomy).
The Policy is also inspired by international principles and initiatives, such as:
- United Nations Global Compact (2000);
- United Nations Sustainable Development Goals (2015);
- Paris Agreement on climate change (2015);
- Good practices for climate-related and environmental risk management (2022) of the European Central Bank;
- Task Force on Climate-related Financial Disclosures (TCFD) Recommendations (2017);
- UNEP FI Principle for Responsible Banking (PRB) (2019);
- EIB eligibility excluded activities and excluded sectors list (2022) of the European Investment Bank.
The main internal regulations related to this Policy include:
- Code of Ethics;
- Sustainability Policy;
- Environmental Policy;
- Credit process guidelines;
- Regulation of the loan origination and review process;
- Regulation of the process of definition and monitoring of credit policies;
- Counterparty climate and environmental score methodological guide.
The integration of ESG factors in the credit process
As with any key processes that characterise its business model, Banca Popolare di Sondrio has defined an ESG risk management framework, designed to include in its credit granting practices the assessments of its credit counterparties' exposure to ESG risk factors through proprietary scoring methodologies.
The ESG risk scoring methodologies and tools follow the principle of 'dual materiality', meaning that the Bank can simultaneously be subject to the negative influence of ESG factors ('outside-in' perspective) and have, itself or through the economic and financial activities of its counterparties or investment activities, a negative impact on ESG factors ('inside-out' perspective).
Based on this dual perspective, the Parent Company has defined the following ESG risk assessment systems:
sectoral ESG score
Sectoral ESG score: an assessment conducted through the development of a specific matrix tool which enables the identification and quantification of the potential exposure to ESG liability risk of counterparties based on whether they belong to a specific economic sector
single counterparty ESG score
Single counterparty ESG score: calculated automatically with proprietary model through data and information from external info-providers and questionnaires administered directly to the counterparty
In accordance with the Group's values and commitments to integrate ESG factors into its business and operations, Banca Popolare di Sondrio, has identified a list of ESG-sensitive sectors, including:
In addition to the aforementioned sectors, the operations related to the following counterparties are included: i) counterparties resident in countries with favorable tax treatment; ii) counterparties resident in countries subject to embargo/restriction of goods.
The Group, in order to mitigate ESG risks of the counterparties and/or transactions, has established the application of general criteria in the credit granting phase that include intensified controls and an escalation decision-making process and, where possible, customers support in a transition towards a more sustainable business.
The Group is active in developing and offering products to support customers.