Svenska Handelsbanken : Climate change report - next steps 2021 (pdf 6,4 MB)

Handelsbanken's climate	2021
change progress report - next steps

Increased scope and updated methodology

- in line with the recommendations of the Task Force on Climate-related Financial Disclosures

Contents

Introduction and background	3
Summary of sustainability governance,	4
climate strategy and risk management
Climate-related risks and opportunities	6
Metrics and targets	10
Appendix	14

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 Handelsbanken. 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 wider economy.

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

About TCFD

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 final report in June 2017, 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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CLIMATE CHANGE PROGRESS REPORT 2021 - NEXT STEPS

Introduction and background

Climate change is possibly the biggest challenge of our time and we at Handelsbanken see a steadily increasing interest as well as increased requirements on how the financial industry handles risks and opportunities related to climate change.

To help meet the need for increased knowledge on these issues, Handelsbanken published a first climate report in December 2021 related to the Bank's lending that was prepared in accordance with the global recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD). This initial climate report was a first step in quantifying the potential future financial consequences of climate change on the Bank's lending portfolio. While there is still significant work to be done to be able to do this fully, we are committed to transparency when it comes to our progress.

Since the publication of the climate report in 2021, Handelsbanken has continued our work on assessing the potential future consequences on the lending portfolio due to climate change and have thus expanded the scope of the analysis as well as further developed calculation methods used in order to continue to increase knowledge and transparency about risks and opportunities related to climate change.

This report is a continuation of the climate report published by Handelsbanken in 2021. It contains updated data, an increased scope and updated methods, as summarised throughout the report.The Bank's sustainability governance structure, climate strategy and risk management related to climate risk are summarised in this report and can be found in its entirety in the previous report as well as the Annual and Sustainability Report 2021.

From the previous report published in 2021, the following has been updated:

1. Summary of sustainability governance, climate strategy and risk management.
2. Extended analysis of physical climate risks to cover all of Sweden.
3. Increased scope of calculations of financed emissions
   to cover all properties in the Swedish lending portfolio and updated calculation methods.
4. Data as of 31 December, 2021.

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CLIMATE CHANGE PROGRESS REPORT 2021 - NEXT STEPS

Summary of sustainability governance, climate strategy and risk management

Governance

The Board of Directors - The Board has adopted an overarching sustainability policy, which sets out the direction for the Group's sustainability work. The direction of the sustainability work is that Handelsbanken aims to integrate financial, social and environmental sustainability into all our operations, which means that the group is to run financially sound, sustainable operations and to 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 is maintained.

This policy applies throughout the Handelsbanken Group, our operations and employees, and encompasses all activities in relation to customers, suppliers and other business partners. The sustainability policy has been supplemented with a number of CEO guidelines that address specific areas and sectors. Among these are guidelines on matters relating to the environment and climate change.

Executive Management - Group-wide decisions concerning strategies for work related to climate change, and

targets linked to this area, are made by the Bank's Group Chief Executive (CEO). It is also the CEO who adopts new guidelines such as Handelsbanken's guidelines on the Environment and Climate change. In May 2022, the Bank's guidelines on Environment and Climate change was updated to further establish our commitment to a 1.5°C target, expanding on the Bank's stance on financing of fossil fuels to restrict new relations with fossil fuel companes and disclose our view on fossil fuel companies in transition in the lending portfolio.

The Bank's central sustainability department, Group Sustainability, has the task of co-ordinating, supporting and acting as a driving force behind our sustainability work. This includes the responsibility of developing proposed improvements to the Bank's sustainability strategy, as well as compiling and communicating the work externally. The work is led by the Head of Group Sustainability, who reports directly to the Bank's CEO. In March 2022, the Head of Group Sustainability also became a member of the Executive Management, further strengthening Handelsbanken's ambition to integrate sustainability into all operations. With this, Handelsbanken became the first major bank in Sweden with a dedicated Head of Sustainability as part of Executive Management.

Sustainability governance in Handelsbanken

Elects/appoints/in

Informs/reports

The Board

Group Chief Executive

Sustainability Committee

Group Sustainability

Green Finance Committee

Sustainability Task force

Sustainability Home Markets

Sustainability

Programme

Strategy

With sustainability being an area of strategic importance for Handelsbanken, we are proud to have launched Group-wide sustainability targets in February 2021. The targets address not only the Bank's long-term climate ambition, but also our determination to further and fully integrate sustainability into our core business - financing, asset management and advisory services. We are now working to further develop our strategies around these targets, with particular focus on product and business development, training, governance, measuring and reporting. With core values such as low risk tolerance, local engagement and long-term customer relationships, sustainability has been a deep-rooted value within our culture for many years.

Handelsbanken's climate strategy is founded on four pillars:

1. Scientific targets - Handelsbanken's target is to achieve
   net zero emissions of greenhouse gases as soon as possible, and by 2040 at the latest. This target applies to the entire Group and covers lending, leasing and investments, as well as Handelsbanken's own operations. In order to ensure that our emission targets are based on a solid scientific footing, the Bank will seek validation from the Science Based Targets initiative (SBTi).
2. Measure and report - Measuring, reporting and transparency are central tenets of our climate strategy. In setting our targets for 2040, we will keep increasing the scope of our financed emissions to include our lending portfolio. As a means to ensure this is done correctly, the Bank joined the Partnership for Carbon Accounting Financials (PCAF) in 2021. This will serve to guarantee that our emissions are calculated according to best practice, as well as contributing to harmonisation and standardisation within this developing area.

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CLIMATE CHANGE PROGRESS REPORT 2021 - NEXT STEPS

1. Support our customers - Handelsbanken aims to work alongside our customers on their journey towards net zero emissions of greenhouse gases. Central to this is the development of products and services that contribute to such reductions.
2. Responsibility and collaboration - Climate change is a global problem requiring global solutions and co-operation. If the target of the Paris Agreement of net zero greenhouse gas emissions across the globe is to be achieved, then the global financial system will need to change.This is why Handelsbanken has proudly endorsed the Principles for Responsible Banking (PRB) for several years, as well as supporting other international initiatives for sustainable business. This report should be seen as part of the implementation of the PRB at Handelsbanken.

Risk management

The Bank's process for identifying, assessing and managing climate risks is an integral part of the Bank's standard credit process. At Handelsbanken, the credit process is based on a conviction that a decentralised organisation with local presence ensures high quality in credit decisions. Handelsbanken is a relationship bank where the branches maintain regular contact with the customer, which gives the branch an in-depth knowledge of each individual customer and a continuously updated picture of the customer's situation. The Bank's overall risk profile is that risks are to be kept low.

In Handelsbanken's decentralised organisation, each branch responsible for customers has full credit responsibility. Identifying and assessing a company's climate-related risks is a part of the Bank's credit risk assessment of our customers. This includes assessing whether, and if so to what extent, climate change affects the risk of financial strain and the credit risk that could arise thereof.

Credit process at Handelsbanken

LEVEL

When the Bank assesses a company's sustainability risks, we do so within five main areas: Environment, Human rights, Basic principles regarding working conditions, Corruption & bribery and Climate risks. Climate risks was introduced as a separate main area in 2021. At the same time, instructions were revised and clarified regarding the assessment of climate risks and documentation requirements were expanded for larger credits.

The Head of Group Credits is responsible for the quality and maintenance of the Bank's credit process. The Head of Group Credits reports to the CEO and is a member of the

credit committee established by the Board. The Head of Group Credits also reports to the Board regarding losses and risks in the credit portfolio.

			Local	Country/
	Account	Branch	credit	Country	Group	The Board's
	county
Proposal	department,	credit	Board	Decision
manager	manager	credit	board	Credits
	credit	committee
			specialist	committee

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