МTB Group implements ESG risk management in risk management activities on all three lines of defense. In accordance with the Risk and Capital Management Strategy, VTB Group integrates ESG risks into the risk management system through an assessment of ESG factors impact on VTB Group risks.
Factors related to the environment (E-factors), social (S-factors) and corporate governance (G-factors) have a positive or negative effect on the financial performance of VTB Group. The transmission channels of ESG factors can be:
the effects of the transition to a low-carbon economy, such as increased research and development costs for VTB’s customers, changes in the profitability of asset groups, early retirement of obsolete assets, increased transaction costs associated with new regulation, low customer loyalty and limited access to capital, and a declined in the attractiveness of VTB Group as an employer;
events relating to natural disasters resulting in loss of customer assets and collateral and in disruption of VTB Group operations under normal operating conditions;
the realization of events such as rising ocean levels, reduced water availability and soil fertility resulting in increased operating costs.
VTB Group determines procedures for managing ESG factors in risk standards, which are developed at the consolidated level and applied by VTB Group members. They regulate the procedures for identifying, assessing risks, controlling their amount and structure, and identify effective measures to optimize and reduce risks. In addition, risk standards contain requirements for the preparation of regular risk reports submitted to the Management Board (monthly) and to the Supervisory Board (quarterly) and including ESG risk management issues.
VTB Group determines the materiality of financial risks and non-financial risks, taking into account the assessment of the impact of ESG factors. This provides a link between the degree of influence of ESG factors on the financial position of VTB Group and approaches to managing these risks and capital. VTB Group establishes a risk appetite for limiting the financing of project/ counterparties that are not in line with sustainable goals and evaluates economic capital taking into account the influence of ESG factors.
To assess the impact of ESG factors, VTB Group segments the corporate loan portfolio, focusing on the E-component. Currently, VTB Bank has developed a prototype of an ESG questionnaire and started collecting data to evaluate ESG ratings of customers.
The training on the process of integrating ESG risk management into the VTB Group risk management system was conducted in 2021. It was attended by the heads of risk management of VTB Group Companies and the heads of VTB Bank’s risk divisions.
Information about the integration of ESG risks into the risk management system — Risk management