Svenska Handelsbanken : Climate change report 2022

Handelsbanken's climate 2022 change progress report

Contents

Foreword from our Chief Sustainability and Climate Officer	4
Governance	5
The Board of Directors and Executive Management	5
Co-ordination	5
Strategy	7
Our climate strategy	7
Climate-related risks and opportunities	9
Risk management	13
Metrics and targets	14
The Bank's financed emissions	14
Green lending	16
Energy efficient buildings	16
The Bank's own emissions	17
Appendix	18

About this report

The purpose of this report is to inform stakeholders about our progress related to climate change. The scope of the report is the lending operations of the Handelsbanken Group. For more information about our work with climate change mitigation in our role as Asset manager and Asset owner, please see the separate, publicly available reports at handelsbanken.com. With this report we hope to contribute to increased transparency and the continued development of forward-looking information related to climate change within the financial sector, as well as in the broader economy.

The report has been prepared in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures.

AboutTCFD

The international Task Force on Climate-related Financial Disclosures (TCFD) was formed in 2015 and tasked with correcting the scarcity of information regarding companies' work on, and management of, climate change. The TCFD has developed a reporting framework focused on providing useful information to lenders, insurers and investors.

The widespread adoption of the TCFD framework would allow for climate change to be factored into financial decision making, allowing a more efficient allocation of capital, and help smooth the transition to a low-carbon economy.

The TCFD published its implementation guidance June 2017, followed by an update in 2021, structuring its recommendations into four areas: Governance, Strategy, Risk Management, and Metrics and Targets.

Together with underlying disclosures within each area, the framework provides a standardised and relevant way of helping investors and others understand how the reporting organisation assesses and manages climate-related risks and opportunities.

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Foreword from our Chief Sustainability and Climate Officer

As we issue this second climate change progress report covering the Bank's lending portfolio we do so with

mixed emotions. On the one hand, eager to share our insights and proud to contribute them, and on the other hand we remain concerned about the state of the issue that compels our organisation to gather these insights in the first place: climate change.

Climate change is possibly the biggest challenge of our time and its consequences are increasingly severe and are felt worldwide as heatwaves, droughts, wildfires and floods are becoming more common and widespread. All bodies of society, both public and private, need to do more and accelerate the pace. At Handelsbanken, we are determined to do our part and support our customers through the climate transition by aligning our business decisions with the 1.5°C target and becoming a net-zero company by 2040.

In terms of global greenhouse gas emissions, 2022 did not deliver the reduction the world needed, by far. The global average temperature continues to rise and the window to stay below the 1.5°C limit stipulated by the Paris agreement alive is closing on us. This means that the world is edging increasingly closer to two costly outcomes: a delayed and thus disorderly transition with high costs as a result of stranded assets, or a transition which is too slow - or does not happen

• with high costs as a result of adaptations to a warmer climate and the costs of disruption and destruction that come with a more unstable world.

But it is not all gloom and doom. Acknowledging that more will be needed from the global political agenda, the financial sector made significant progress in 2022 towards alignment with the Paris agreement. More than 60 members of the Net-Zero Banking Alliance, of which Handelsbanken is one, published science-based reduction targets for 2030, prioritising the most carbon intensive sectors or their most significant financial exposures. A lot of work lays ahead but a few fundamental pieces of the puzzle of aligning financial flows with the Paris agreement are gradually being put in place.

During 2022, Handelsbanken took several important steps towards this alignment and towards achieving our goal to be a net-zero company by 2040. We calculated our total financed emissions related to our real-estate lending portfolio and set an emission reduction target for 2030 in line with the 1.5°C limit. Significant progress was also made under our Responsible finance target of reaching 20 per cent green, social and sustainability-linked lending by 2025. On the governance side, we also strengthened our guidelines related to climate change to further align our lending to fossil energy with the 1.5°C limit. The Bank also updated its Green Bond framework to adapt it to market and regulatory developments but also to be able to support a wider range of customers, both corporate and private, in their transition and in their desires to make their business and homes more energy-efficient.

2022 was the first year in which we have been able to track progress towards our 2030 target for financed emission. Reported emission decreased with 7.4 per cent which is, albeit in line with the decrease required to reach the 2030 target, still a very early first indication of the direction needed. We remain humble to the challenges of data quality, changes in calculation methods, changed market conditions and regulations that all signal that we are in for a decisive decade but during which emission reductions are unlikely to be clear, linear and straight-forward.

In 2023, our work with the issue of climate change will continue to be an area of strategic focus for the Bank. Handelsbanken will further expand the scope of targets to include more high emitting sectors, with the aim to get targets approved by the Science Based Target Initiative. We will continue to develop products and services to support our customers on our common journey towards net-zero emissions.

This is Handelsbanken's second TCFD-report covering the Bank's lending portfolio and it focuses on those sectors that are the most material for the Bank from a climate perspective. Measuring, analysing, developing and reporting are all positives and powerful levers of change and for that reason we are proud to submit to our stakeholders this report and by doing so hopefully also contribute further insights to the broader market. There is still work to be done before the Bank has fully integrated all risk and opportunities related climate change into the Bank's operations, but we are

determined to play our part and committed to transparency when it comes to our journey towards net-zero and Paris alignment.

Catharina Belfrage Sahlstrand

Chief Sustainability and Climate Officer, Handelsbanken

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Governance

The Board of Directors and Executive Management

The Board has adopted an overarching Policy for sustainability, which sets out the direction of the Group's sustainability work. Management of risks and opportunities related to climate change is an integral part of the Group's sustainability work. The direction of the sustainability work is that Handelsbanken aims to integrate financial, social and environmental sustainability into all of the Bank's operations, which means that the Bank is to run financially sound, sustainable operations and encourage and contribute to sustainable development. This way, risks and costs can be reduced, while new business opportunities can be identified, employees stay motivated, and confidence in Handelsbanken maintained.

Group-wide decisions concerning climate strategy, and targets linked to this area, are made by the Bank's Chief Executive Officer (CEO). The CEO also establishes guidelines describing how various risks related to climate change should be managed and reported, including

for example the guidelines on the Environment and Climate change.

The Chief Sustainability and Climate Officer reports to the CEO and the Board on the Bank's overall sustainability activities, including climate change, every quarter. This includes matters of urgency to the organisation, and performance in relation to the sustainability targets adopted by the Bank, such as the net-zero target and Responsible finance target. This reporting shall also include any significant deviations and, where necessary, actions taken as regards Handelsbanken's sustainability work. No significant deviations were reported to the Board during 2022, but examples of matters that were discussed from a strategic perspective include the exclusion of certain climate relevant sectors from the Bank's funds and conflicting goals in the energy sector.

In the third quarter, a training course was held for the Board and executive management on the global causes and consequences of climate change. The Board has also been kept up to date on the forthcoming sustainability regulations to be introduced as part of the EU's European Green Deal.

In 2022 the Bank's guidelines for the Environment and Climate change were revised to better align the Bank's lending towards fossil energy with the 1.5°C target. The guidelines were complemented with further guidance in the form of a sector framework, detailing the specific criteria under which Handelsbanken considers a fossil energy company to

be aligned with the 1.5°C target and thereby potentially eligible for financing. For more information about the specific criteria see Sector framework - Fossil energy.

Co-ordination

Handelsbanken's sustainability work is co-ordinated by a Group-wide specialist function headed by Handelsbanken's Chief Sustainability and Climate Officer, who reports directly to the CEO. The Chief Sustainability and Climate Officer is part of the executive management team which means that sustainability-related matters are factored into the ongoing executive work and strategic decision making.

The Chief Sustainability and Climate Officer is also the Chair of Handelsbanken's Sustainability Committee, which was formed in 2010. The Sustainability Committee analyses the sustainability work undertaken by the Group and, where necessary, takes on a co-ordinating role.

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