ESG Factor Management in Lending Activities

As of the reporting period, the Bank had not yet established a separate ESG risk management system. However, work is underway to develop such a system, in line with new regulatory changes introduced by the National Bank of the Republic of Kazakhstan under the updated Rules for Formation of Risk Management and Internal Control System for Second-Tier Banks, and Branches of Non-Resident Banks of the Republic of Kazakhstan. 

In 2025, the Bank will, in accordance with these new regulatory requirements, develop internal procedures for decision-making regarding the acceptability of environmental and social risks in significant and high-risk projects prior to entering into loan agreements. The procedures will also define cases in which the Bank will refuse to engage in lending operations associated with high environmental and social risks. In this way, the Bank will integrate ESG factors directly into its credit decision-making processes.

The Bank acknowledges that establishing clear assessment and reporting standards for all issued loans, ensuring transparency, and actively applying ESG standards in decision-making will not only reduce risks but also contribute to the development of sustainable and socially responsible financial products.

At the current stage, the Bank has approved a Methodology for Assessing the Compliance of New Lending Programs with the Principles of Sustainable Development. Based on this methodology, lending programs are evaluated and deemed eligible for financing through social and green loans and/or through the issuance of social and green bonds. The selection criteria for such ESG projects are defined based on their social and environmental goals and characteristics, in accordance with international and national standards and best practices.

In selecting these ESG projects, the Bank strives to ensure that the lending programs:

1. are socially and environmentally sustainable (ESG-oriented);
2. respect the rights of employees and local communities impacted by the lending programs;
3. are developed and implemented in compliance with applicable regulatory requirements and international best practices.

A list of the Bank’s lending programs that align with the principles of sustainable development has been compiled and published on the official website of Otbasy Bank AO at hcsbk.kz, in the Sustainable Development/Reporting section.