ESG Risk Management

ESG risk management is an integral part of the Bank’s overall risk management process, which takes into account not only financial, but also non-financial risks that may impact the Bank’s long-term sustainability. All material risks affecting the achievement of strategic objectives are reflected in the Bank’s Risk Register.

Along with credit, market, strategic, operational, compliance, liquidity, information security and IT risks, the Bank’s Risk Register includes a separate group of ESG risks.

ESG risks are identified taking into account the expectations of investors, staff and other stakeholders of the Bank. To take into account all possible consequences of the Bank’s activities, the following is analyzed on a periodic basis:

• the needs of stakeholders;
• potential conflicts that may jeopardize projects or arise at various stages of their implementation;
• opportunities and relationships that may arise in the course of implementation of the Bank’s projects.

For ESG risk management purposes, the Bank analyzes both internal and external risk exposure factors and takes appropriate measures to minimize them.

Based on the analysis of these internal and external factors, the Bank developed a detailed list of ESG risks covering environmental, social, and corporate governance domains. This list was subsequently approved by the Bank’s Board of Directors and incorporated into the official Risk Register.

The identified ESG risks in the Risk Register are classified as follows:

1. environmental risks: non-compliance of the Bank, its authorized bodies and employees with the requirements of the environmental laws of the Republic of Kazakhstan;
2. social and labor risks: violation by the Bank of labor laws in terms of occupational health and safety, resulting in temporary or permanent disability of an employee, non-observance by the Bank of the rights and legitimate interests of employees, violation of working hours and rest periods, lack of staff motivation, lack of indexation of remuneration, low level of employee involvement, lack of professional development programs;
3. corporate governance risks: reduction of supervision by the Bank’s Board of Directors over the efficiency of the internal control system.

The assessment of these risks is carried out using two metrics – likelihood of occurrence and impact (consequences). The final rating assigned to social and labor risks, as well as corporate governance risks, is low. Environmental risk is assessed as moderate.

Therefore, the Bank’s Risk Register functions as a systematic tool for tracking and managing ESG risks, enabling the Bank to act responsibly and minimize potential negative impacts on its operations, customers, and society at large.