Response to climate change
Management of Environmental Risks
In order to achieve the net zero target, SMBC Group internally monitors portfolio GHG Emissions (financed emissions) within the "Risk Appetite Framework" on the basis of securing appropriate risk-return levels; and at the same time, we promote engagement for the sectors with large GHG emissions and ensure adequate control of credit portfolio.
In the actual operations, we quantitatively grasp the impact on SMBC Group in advance through estimating the credit costs of physical risks and transition risks by scenario analysis; and we verify the sufficiency of the Group’s responses to climate change response through analyzing and evaluating it as per the Risk Register and KREs (Key Risk Events).
1.Risk Appetite Framework
To achieve its net-zero target, the SMBC Group has been managing its credit portfolio within the framework of controlling risks for the entire Group. Specifically, in April 2023, within the Risk Appetite Framework, we created "climate-related" category, in which we set portfolio GHG emissions (financed emissions) as a management indicator. We now manage our portfolio GHG emissions by sector and business units to match the 1.5 degree scenario.
2.Risk management in financing
The SMBC Group has established a due diligence system to appropriately manage the impacts on the environment and society through its business activities. Specifically, we have established policies for sectors and businesses that are likely to have an impact on the environment and society, such as coal-fired power generation and coal mining. When considering financing for large-scale projects, we conduct an environmental and social risk assessment in accordance with the 'Equator Principles'. In addition, we consider non-financial information such as GHG emissions and climate-related risk responses of businesses, and use them as a qualitative judgement factor in our credit assessments.
SMBC Group regularly organizes study sessions for sales offices and the Credit Department to spread awareness of environmental and social risks internally and enhance understandings of policies for businesses and sectors that are likely to have significant impact on the environment and society, due diligence flow, and environmental and social risk assessment procedures.
Details of study sessions held in FY2022 at Sumitomo Mitsui Banking Corporation are as follows:
|Description||No. of times held||Subjects|
|Practice of environmental and social risk assessments||4 times||Domestic and overseas sales offices|
|Policies on specific sectors||Once||Overseas sales offices|
|Human rights||Once||Overseas sales offices|