ESG Governance
ICICI Bank strengthened its commitment towards ESG with the adoption of the Board-approved Environmental, Social and Governance Policy (ESG) into its governance structure. The Board Risk Committee has been assigned responsibility for oversight on the overall ESG activities. ICICI Bank is adopting global disclosure standards and aims to continue enhancing ESG-related disclosures.
Responding to Climate Change Risks
The Bank is cognisant of the uncertainties from climate change and its impact on the economy and financial systems. The Bank’s Board has acknowledged the need to address the impact of climate change risks and is committed to aligning its efforts with the nation’s commitments to transitioning to a low-carbon economy.
The Bank has a Social and Environmental Management Framework (SEMF) for screening new project finance proposals. The framework stipulates environmental and social due diligence for projects above specific thresholds. It has an exclusion list of industries not permitted for financing and list of highly polluting sectors that require additional due diligence while taking financing decisions.
The Bank has recently taken a step further in the process of incorporating ESG and climate risk aspects as part of the credit evaluation process. Borrower-level ESG scores from external agencies are considered during the evaluation of a proposal. Further, the Bank has developed sector-specific ESG Risk Assessment Tools for evaluation of borrowers and a framework for assessment of climate-related physical and transition risks that a borrower in the sector could be exposed. A response is sought from top borrowers of the Bank on these identified areas that helps in profiling the borrowers, based on their ESG-related risks and maturity in terms of policies and processes deployed to address these risks. The data gathered is then evaluated to understand the ESG profile of the Bank’s borrowers, likely concentration risks and determining the next steps.
For addressing risks emanating from climate change, we have introduced a Climate Risk Management Framework (CRMF), which is an extension of our ESG policy. The scope of the Framework comprises assessment of impact of climate change on the Bank’s own operations, climate risk management of the Bank’s loan book and integration of material climate risks into the existing risk management framework. The Framework will be periodically reviewed for aligning with regulatory guidance on climate risks. A team within the Risk Management Group is overseeing the implementation of the framework.
The Bank has been providing training to employees in the risk and other relevant teams to create an understanding on issues of ESG and climate risks, and an awareness to better appreciate the potential risks and opportunities the nation may experience as we align our efforts towards transitioning to a low-carbon economy.
