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.

KBank integrates environmental, social, and governance (ESG) considerations into its credit underwriting process to support responsible and sustainable financing. The Bank requires an assessment of ESG‑related risks and impacts for relevant financing activities in line with applicable laws, regulations, and internal policies.

For commercial loans to medium‑sized enterprises and above, the Bank applies Environmental and Social Screening Tools through the General ESG Screening Form, which covers key ESG aspects. Project finance is subject to enhanced ESG consideration under frameworks aligned with international practices and standards to ensure appropriate identification and management of environmental and social risks.

For commercial loans and projects financed under the IFC Green Bond, KBank manages environmental and social (E&S) risks throughout the credit lifecycle in accordance with the Environmental and Social Management System (ESMS). This ensures that all green finance activities under the IFC Green Bond deliver measurable positive impacts and are consistently aligned with the IFC Performance Standards, international best practices, and IFC requirements.

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 requirements. 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 includes 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.

Environmental and Social Management System (ESMS) FOR IFC GREEN BOND SUBSCRIPTION

KBank has established an Environmental and Social Management System (ESMS) as an integral part of the Bank’s sustainable finance and risk management framework. The ESMS is designed to systematically identify, assess, manage, and monitor environmental and social (E&S) risks and impacts specifically to support financing activities under the IFC Green Bond.

KBank’s ESMS is developed in alignment with international best practices based on IFC Performance Standards, and supports the Bank’s commitment to responsible banking and sustainable development.

Under the ESMS, KBank applies a structured approach to:

The ESMS also incorporates governance arrangements, internal roles and responsibilities, and reporting mechanisms to ensure effective oversight and continual improvement. Through the implementation of the ESMS, KBank aims to mitigate potential adverse environmental and social impacts, promote positive sustainability outcomes, and support the transition toward a low‑carbon and climate‑resilient economy.

Read more on KBank’s Environmental and Social Management System (ESMS).

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 managed 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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