The Bank shall regularly review and improve its ESG risk consideration policy and criteria as well as its credit underwriting to be in line with social and environmental concerns. The Bank has incorporated ESG into its Know Your Customer (KYC) and Customer Due Diligence (CDD) processes to ensure operational efficiency.

Project Finance

KBank integrates Environmental and Social Risk Management into its project finance credit assessment process in alignment with the Equator Principles (EP), through a structured Environmental, Social, and Governance (ESG) due diligence framework. The Bank acknowledges its responsibility to mitigate potential environmental and social impacts arising from its financing activities. All project finances are required to comply with applicable environmental laws and regulations, including Environmental Impact Assessments (EIA) and Environmental Health Impact Assessment (EHIA).

Projects are categorized into three risk levels, Project Finance Type A, B, and C, based on the scale and severity of their potential environmental and social impacts. 

For Type A projects, which pose significant ESG risks, the Bank conducts enhanced due diligence that includes environmental and social impact assessment, safety and emergency response plans, action plans, community consultation, stakeholder engagement, grievance mechanisms, and information disclosure to address concerns from stakeholders including local communities, workers, and NGOs. Independent environmental and social consultants are engaged to review environmental and social information. Bank requires project finance to comply with our ESG requirement. In addition, Bank considers the environmental and social sensitivity of project locations, including those situated within legally protected areas, internationally recognized conservation zones, watersheds, and other areas of high biodiversity value, as well as sites of cultural heritage significance for local communities and Indigenous Peoples. Bank also ensures that project implementation respects the traditional way of life rights of Indigenous Peoples. Bank reviews potential impacts on community livelihoods, occupations, and resettlement, as well as the adequacy and effectiveness of proposed mitigation and remedial measures. In cases where projects affect Indigenous Peoples and displaced persons, Bank considers that a process of Free, Prior, and Informed Consultation (FPIC) is undertaken to ensure their participation and consent. In addition, Bank considers the environmental and social sensitivity of project locations, including those situated within legally protected areas, internationally recognized conservation zones, watersheds, and other areas of high biodiversity value, as well as sites of cultural heritage significance for local communities and Indigenous Peoples. Bank also ensures that project implementation respects the traditional way of life rights of Indigenous Peoples. Bank reviews potential impacts on community livelihoods, occupations, and resettlement, as well as the adequacy and effectiveness of proposed mitigation and remedial measures. In cases where projects affect Indigenous Peoples and displaced persons, Bank considers that a process of Free, Prior, and Informed Consultation (FPIC) is undertaken to ensure their participation and consent.For projects that may create extensive environmental and social impacts (e.g, hydropower generation from dams, projects in foreign countries, etc.), independent consultants or third-party experts are appointed to ensure that the projects are carried out in accordance with EP, the relevant regulations and laws to prevent any adverse impact on the environment and community members’ quality of life. The example list of advisors include AFRY, WSP Global, Emergent Ventures Inter, Shaw’s Stone & Webster, and Greener Consultant etc. 

For medium and lower-risk projects (Types B and C), a General ESG Screening Form is used to evaluate ESG risks and management approaches. ESG considerations are integrated into credit decisions to ensure responsible and sustainable financing.

The application for project finance must be in line with the credit policy elaborated below.

Capacity Building in Environmental and Social Risk Management 

Due to the complex risks associated with project finance, it is essential that KBank staff possess an understanding of environmental and social (E&S) risks, along with the ability to assess specific risk issues. To strengthen internal capacity, KBank has established the “Climate Transition Capacity-Building Project” to equip employees with knowledge on green loans, green buildings, and climate change risks through training sessions. These sessions provide in-depth training on environmental and social risk management based on the IFC Performance Standards, which play a key role in risk identification for project finance. The training covers various aspects of E&S risk management, including risk identification, impact assessment, the development of Environmental and Social Management Systems (ESMS), and action plans to address potential adverse impacts. All topics are designed to support the integration of E&S considerations into the Bank’s risk management processes.

In addition, KBank is committed to investing in alignment with sustainable development principles and its Net Zero commitment. To support this, as part of KBank investment policy, it is required that all active, passive and third-party manage investments must comply with applicable laws, regulatory requirements, and KBank’s internal strategies and policies. This includes alignment with the Bank’s Credit Policy on Environmental, Social, and Governance (ESG) factors, ensuring that investment decisions are consistent with KBank’s broader ESG objectives​

Read more in KBank's Sustainability Report 2024 Chapter Responsible Lending and Investment: ESG Credit and Investment

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