10. ESG risks and climate-related financial risks

ESG risks and climate-related financial risks (hereinafter: ‘ESG risks’) represent the risk of negative economic impacts for VP Bank that may arise from environmental, social and corporate governance factors. VP Bank does not consider ESG risks to be a separate risk category, but rather a risk driver that can manifest itself in other risk groups or risk categories. VP Bank records, evaluates and takes ESG risks into account in its business activities and when assessing its counterparties and client relationships.

In the lending area, ESG risk monitoring and reporting has been established to manage ESG-related credit risks in the Lombard lending business. Risk monitoring and reporting is based on VP Bank sustainability scores (VPSS) and the compliance standards of the UN Global Compact (UNGC), the UN Guiding Principles on Business and Human Rights (UNGP) and the International Labour Organization (ILO).

Similarly, ESG risk monitoring and reporting has been established in the area of financial investments on the basis of VP Bank sustainability scores (VPSS) in order to manage ESG-related risks in its own investments by specifying a target value for the portfolio.