Financial and ESG Performance Review
ESG
ESG Strategy | Timeline
4Q 2021
Announcement of novobanco
strategic plan & Internal
definition of ESG targets
2023
Roll-out of Climate &
Environment (C&E) risks into
the loan origination framework
2024
Comprehensive assessment of
the new methodology's
performance
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Business Environment:
Definition of annual goals for green
investment, agreed with key business
lines and considering potential alignment
with EU Taxonomy (conservative
approach as compared with current
market practices).
• Definition of Key Risk Indicators for
physical risk and exposure to relevant
sectors that began monitoring in 2022
•
• Comprehensive sectoral scoring of the
portfolio and risk materiality assessment
is underway with results in 1Q23
novobanco
Risk management framework:
• Developments for full integration of C&E risks into
the loan origination framework are underway,
comprising the development of risk methodologies
(top down and bottom-up, incl. ‘rating'), based on
which the on-boarding procedures (ie: required
data) and decision framework will be adjusted.
• These methodologies will provide an integrated
assessment in terms of the client/ transaction risk
profile and EU Taxonomy (alignment) classification.
• Implementation schedule: a) 2022YE technical
developments concluded; b) 2023E pilot (covering
sampled sectors)/ silent-run and roll-out (for
remaining key sectors).
Credit Risk:
€
• Simplified approaches are already in place for pricing
(ie: specific credit products have been designed to
include ESG criteria broadly consistent with the
Taxonomy requirements; promotional pricing allowed
in those cases, as they are assessed as better
prepared to face the transition risks).
• Once structural developments in terms of the risk
methodologies are concluded, novobanco will be able
to assess the performance of the classified exposures
and, therefore, introduce any change to its pricing
policy/model.
• Methodologies to be deployed during 2023, with 2024
targeted for a comprehensive assessment of the new
methodology's performance.
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