SpareBank 1 Østlandet : Sustainability Impact Analysis 2023

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2023

Sustainability Impact Analysis

SpareBank 1 Østlandet 2023

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Summary	3
Background for the analysis	4
About the impact analysis	5
The result from the previous analysis	5
The steps in the analysis	6
Weaknesses in the analysis	6
Step 1 About the business	7
Step 2 Sustainability topics and na�onal needs	7
Step 3 Impact	8
Retail Market - RM	8
Corporate Market - CM	10
Step 4: Results and Conclusion	11
Retail Market - RM	12
Corporate Market - CM	13
Conclusion	15
How has this been further integrated into the bank's work	15
Guidelines and Strategies	15
Strategic Ini�a�ves	16
Targets to address the sustainability topics identified in the analysis	16
Ending	18

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Summary

In 2019, the UN Environment Programme for the Financial Sector (UNEP FI) launched the Principles for Responsible Banking (PRB).1 The purpose of the principles is to ensure that the banking sector is a driving force behind the UN Sustainable Development Goals and the objec�ves of the Paris Agreement. SpareBank 1 Østlandet was a founding signatory and ac�vely involved from the start. A part of the work on this ini�a�ve involved the development of an impact analysis that shows the banks where they have major posi�ve and nega�ve impacts on sustainability topics.

SpareBank 1 Østlandet operates exclusively in Norway, more specific in Innlandet, Oslo and Akershus, so the analysis has been conducted for Norway. The Bank has previously carried out analyses that show where we have the greatest impacts on society via our value chain, mainly through the services we offer to private customers and businesses. This means we are talking about indirect impacts. The impact analysis examines data from these business areas, as well as sta�s�cs on relevant sustainability topics for Norway.

The analysis provides us with a gross list for the retail market (RM) and the corporate market (CM). Based on this gross list, we have selected the most significant topics within the bank's context. These are:

• Climate - RM and CM
• Circular economy - RM and CM
• Financial inclusion - RM

To address the material topics iden�fied in the analysis, we have adopted six strategic ini�a�ves for the strategy period 2022-2025:

• Greener agriculture - CM
• Greener real estate - CM
• Greener real estate - RM
• Responsible consump�on - RM
• Net zero greenhouse gas emissions by 2050 - cross-cu�ng
• Inclusive finance - RM

The main objec�ves for these strategic ini�a�ves are summarized in the report. When the bank last conducted this impact analysis, the topics of climate, resource u�liza�on, and resource security emerged as the most nega�vely impac�ul, both in the RM and CM sectors. The topic of "inclusive, healthy economies" ranked third in the RM, so we also began work on financial inclusion. This year's analysis reaffirms the same topics, with some slight changes in terminology. It confirms that we have had the correct thema�c focus in our sustainability efforts.

1htps://www.unepfi.org/banking/bankingprinciples

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Background for the analysis

SpareBank 1 Østlandet wants to contribute to the banking industry's collec�ve global sustainability work. The UN Environment Program (UNEP) has a partnership with the financial sector through the Finance Ini�a�ve (UNEP FI). The Principles for Responsible Banking (PRB) were officially launched by UNEP FI in September 2019. Banks that sign up to the PRB commit themselves to complying with the six principles shown in Figure 1. The aim of the principles is to ensure that banks around the world assume the role of being a driving force in the efforts to meet the UN Sustainable Development Goals and the commitments set out in the Paris Agreement.

Figure 2: Overview of the Principles for Responsible Banking.

Principle 1 - Alignment: Banks must align their business strategy to be consistent with and contribute to individuals' needs and society's goals, as expressed in the Sustainable Development

Goals, the Paris Climate Agreement and relevant na�onal and regional frameworks.

Principle 2 - Impact and target se�ng: Banks must con�nuously increase their posi�ve impacts while reducing the nega�ve impacts on, and managing the risks to, people and environment resul�ng from their ac�vi�es, products and services. To this end, banks must set and publish specific targets where they can have the most significant impacts.

Principle 3 - Clients and customers: Banks must work responsibly with their clients and their

customers to encourage sustainable prac�ces and enable economic ac�vi�es that create shared prosperity for current and future genera�ons.

Principle 4 - Stakeholders: Banks must proac�vely and responsibly consult, engage and partner with

relevant stakeholders to achieve society's goals.

Principle 5 - Governance and culture: To achieve their goals for responsible and sustainable banking

opera�ons, banks implement their commitment to these Principles through effec�ve

governance and a culture of responsible banking.

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Principle 6 - Transparency and accountability: Banks must periodically review their individual and

collec�ve implementa�on of these Principles and be transparent about and accountable for their posi�ve and nega�ve impacts and their contribu�on to society's goals.

About the impact analysis

A significant part of UNEP FI's PRB work has been the development of an impact analysis, where banks can assess their significant posi�ve and nega�ve influences on their surroundings. SpareBank 1 Østlandet was involved in the development of this tool and conducted the analysis for the first �me in 2020. Star�ng in 2022, UNEP FI's impact analysis gradually transi�oned to a "modular" format, where the various components, namely "context," "iden�fica�on," and "assessment," make up the analysis.

The analysis shows where the bank has a posi�ve and nega�ve impact on various sustainability topics. SpareBank 1 Østlandet operates exclusively in Innlandet, Oslo, and Akershus, so the analysis has been conducted within these coun�es. Previous analyses conducted by the bank have shown that our greatest societal impact is through our value chain, primarily through the services we offer to private customers and businesses. This pertains to indirect influence. In the UNEP FI impact analysis, we examine this through the bank's major business areas: the retail market (RM) and the corporate market (CM). Lending is the bank's largest business area, complemented by the services offered to the retail market. The analysis u�lizes data from these business areas, as well as sta�s�cs on relevant sustainability topics for Norway.

The Bank uses UNEP FI Portfolio Impact Analysis Tool For Banks - V 32 to conduct its analyses. This was developed in a collabora�on between the member banks, and, as previously men�oned, SpareBank 1 Østlandet was involved in both the tool's ini�al development and the tool's revision. The analysis was based on the tool and integrated guidance. Generally, the analysis follows a series of steps, and this report is based on the same structure:

The result from the previous analysis

The bank updated the Impact Analysis last in 2022. At that �me, we iden�fied the following seven sustainability themes where

the bank has the greatest
poten�al for posi�ve and	RM			CM
nega�ve impact: Food,
housing, employment,	Positive impact:	Positive impact:
resource u�liza�on, climate,		1.	Housing		1. Food
	2.	Inclusive, healthy
waste, and inclusive, healthy			2. Housing
	economies
		3. Climate
economies. The impact is		3.	Employment
distributed across the
	Negative impact:
business areas as shown in			Negative impact:
	1.	Resources
		1. Resources
the figure to the right. Based		efficiency/security
		efficiency/security
	2.	Climate
on this analysis, we chose to			2. Climate
	3.	Inclusive, healthy
		3. Waste
emphasize climate and		economies
resource u�liza�on and

2htps://www.unepfi.org/impact/unep-fi-impact-analysis-tools/por�olio-tool/

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security. We also ini�ated work in the area of "Inclusive, healthy economies."

The steps in the analysis

Roughly speaking, the analysis follows these steps, and this report will henceforth follow the same structure:

1. About the business

• The first step of the analysis involves describing the Bank's opera�ons. This means its business areas, products, services and the geographical area to which they are linked.

2. Sustainability topics and na�onal needs (context)

• In the second stage of the analysis, na�onal needs are mapped according to the chosen geographical area. In our case, the tool maps Norway's needs and challenges within the various sustainability topics.
• The tool has a total of 22 sustainability topics covering social, economic and environmental factors in the geographical area.

3. Impacts (iden�fica�on)

• The analysis tool then generates an overview of posi�ve and nega�ve impacts based on the informa�on provided in steps 1 and 2. This informa�on is ranked based on criteria defined in the tool. It is recommended that topics in which the country performs poorly (rela�ve to other countries) should be priori�zed.
• Next, the Bank's impacts are assessed.

4. Results and evalua�on (assessment)

• The tool generates an overview of material topics that should be priori�zed in the sustainability work based on the needs in the country in which the Bank operates, the size of the por�olio and whether we are market leaders in this area.

The first �me the analysis was conducted in the Bank, an internal working group was set up comprising representa�ves of Sustainability and Risk Management and analysts from the CM and the RM. SpareBank 1 Østlandet views the impact analysis as an important supplement to the materiality analysis. The impact analysis provides valuable insights into the Bank's indirect posi�ve and nega�ve impacts on society, which enables us to beter target our sustainability work.

Weaknesses in the analysis

Nevertheless, it is important to note the weaknesses of the analysis. It only provides an indica�on of the impacts that are typical for the relevant industries the Bank finances and the products we offer. In other words, it is not a direct mapping of the impact on our customers, rather it is a general overview of typical challenges related to industries and products in our market area. It thus provides an indica�on of the most important impact areas for each bank. It is not an exhaus�ve overview, which means there could be other topics where the banks have major posi�ve and nega�ve impacts, and which require aten�on, but which are not iden�fied by the analysis.

It's also important to note that this mapping is done globally. Therefore, the sources are global sources and may some�mes be perceived as less relevant for Norway. The analysis must, therefore, be complemented with other analyses, such as a robust stakeholder dialogue as part of the materiality analysis.

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Step 1 About the business

In the first step of the analysis, banks are asked to enter informa�on about their business. It is possible to analyze mul�ple business areas and different countries if the banks are global. SpareBank 1 Østlandet operates in Norway with a market area in Innlandet, Oslo, and Akershus. Lending to the retail market (RM) and the corporate market (CM) are the largest business areas, with RM accoun�ng for approximately 75% and CM around 25% of the loan por�olio's size. This analysis has been conducted for these two business areas.

For CM, we have examined the primary industries to which we lend money. The largest industries in our CM por�olio have been included, represen�ng approximately 90% of the loan por�olio. For RM, we have analyzed the range of services the bank offers to its customers. The bank's impact on sustainability in the market area is calculated based on this. Addi�onally, informa�on from Sta�s�cs Norway (SSB) regarding low, medium, and high-income distribu�on in the Norwegian popula�on has been included.

Step 2 Sustainability topics and na�onal needs

The second step of the analysis involves ensuring that the sustainability topics shown in Table 1 have been input into the tool and adjusted for the countries where the Bank operates.

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Figure 3: Overview of the sustainability themes in the analysis. 3

The result of this sec�on shows that all parameters receive a score from 1 (good) to 4 (poor). This part of the analysis reveals that Norway faces specific challenges in Circular Economy (score 4), with a par�cular emphasis on high energy and material consump�on per capita. Other factors that also score rela�vely high (3) include large amounts of waste, loss of natural habitats, high greenhouse gas emissions per capita, housing, especially within low-income households, and access to healthy food.

Step 3 Impact

A�er entering the figures from the CM and the RM into the analysis tool, it indicates on which sustainability topics the Bank has a posi�ve and nega�ve impact. The figures below depict, for RM and CM respec�vely, where the bank has the greatest poten�al for posi�ve and nega�ve impact on sustainability through its por�olio. Addi�onally, an overview is created to iden�fy which of these areas require sustainability measures the most in Norway. Collec�vely, the informa�on from this stage of the analysis is intended to serve as the basis for further priori�za�on of various themes.

Retail Market - RM

The tool provides us with a figure for both credit products and current accounts and savings products. The blue lines indicate a posi�ve connec�on from the product por�olio to the sustainability topic, while an orange line indicates a nega�ve connec�on. If the line is dark in color, the connec�on is strong, whereas a light color indicates a weaker linkage to the theme. The further the line extends towards the edge of the figure, the larger a por�on of the por�olio is connected to the topic (also indicated by a percentage). The dots on the edge of the figure represent the topics where Norway has the greatest need for change.

3htps://www.unepfi.org/impact/impact-radar-mappings/

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Figure 4: Positive and negative impact on sustainability topics for RM (credit and savings).

The topic that has the most significant posi�ve impact on the product por�olio for RM is inclusive finance. We observe this with a dark blue line on both credit and savings related to the main topic "availability accessibility, affordability, quality of resources & services" in Figure 4 (refer to Figure 3 for an overview of sub-themes). The impact tool operates with this defini�on of the topic:

"Population's accessibility to the use of financial services by individuals and firms. Financial inclusion allows individuals and firms to take advantage of business opportunities, invest in education, save for retirement, and insure against risks. Financial health means a state in which an individual, household, micro, small or medium-sized enterprise can smoothly manage their current financial obligations and have confidence in their financial future. This includes four elements; managing day-to-day finances to meet short term needs; capacity to absorb financial shocks (resilience); capacity to reach future goals; feeling secure and in control of finances (confidence)."4

Here, the por�olio exhibits a strong posi�ve connec�on. However, there is also a weaker connec�on to the same topic. This is within the credit side and pertains to the risk that some customers experience in rela�on to debt burden.

There is also a strong posi�ve connec�on from RM's housing por�olio to the housing topic:

"Population's accessibility to adequate, safe and affordable housing: a place where to live in security, peace and dignity."5

However, the housing por�olio has some weaker nega�ve connec�ons. These are towards crucial areas such as circular economy and climate, primarily occurring because homes in Norway have high energy and material consump�on, resul�ng in a significant environmental footprint.

Explana�on of the topic "climate":

1. UNEP FI, Påvirkningsverktøy. Kilde Hentet fra The World Bank
2. Source: OHCHR, UN-Habitat

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Human activities change the composition of the global atmosphere with the exposure to greenhouse gas (GHG) emissions being a direct factor contributing to climate change. Climate stability can be achieved through the:

• avoidance of GHG emissions (avoided emissions are emission reductions that occur outside of a product's life cycle or value chain, but as a result of the use of that product)
• reduction of GHG emissions (limitation of emissions directly related to the product)
• removal of GHG emissions (anthropogenic activities removing CO2 from the atmosphere and durably storing it in geological, terrestrial, or ocean reservoirs, or in products. It includes existing and potential anthropogenic enhancement of biological or geochemical sinks and direct air capture and storage)6

Explana�on of the topic "circular economy" (comprising sub-themes resource efficiency and waste):

Circular processes contributing to circularity can be grouped into four categories, from the most impactful to the least:

1. Reduce by design: reducing the amount of material used, particularly raw material, should be applied as an overall guiding principle from the earliest stages of design of products and services.
2. From a user-to-user perspective: Refuse, Reduce and Re-use.
3. From a user-to-business intermediary perspective: Repair, Refurbish and Remanufacture
4. From business-to-business: Repurpose and Recycle.7

Corporate Market- CM

Below is an overview of CM's most significant impact based on the industries the bank finances. The symbols in the figures have the same meaning as in the RM figure, but here, a purple dot is also added to indicate the por�on of the por�olio associated with the SME (Small and Medium-sized Enterprises) market.

Figure 5: Positive and negative impact on sustainability themes for CM

Posi�ve contribu�ons are again reflected in the main topic "availability, accessibility, affordability, quality of resources & services," but this �me it affects the sub-themes of housing (from the real

1. UNEP FI, Påvirkningsverktøy, kilde: Intergovernmental Panel on Climate Change, Global CCS Ins�tute, World Resources Ins�tute
2. UNEP FI, Påvirkningsverktøy: kilde: UNEP

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