Security Bank established its Environmental and Social Policy Framework with sound policies and a clear roadmap on how to manage environmental and social issues.

This framework, which is overseen by the Sustainability Committee, guided our efforts in 2021 to create the Bank’s Environmental and Social Risk Management System (ESRMS) which was designed to identify, assess, and manage environmental and social risks associated with our banking operations.

Overview of the Bank’s Environmental & Social Risk Management System (ESRMS) Policy for Corporate Lending

Our approach for corporate lending, following our ESRMS Policy, involves the following:

1. At the core, we understand that the consequences of failing to appropriately manage E&S (Environmental & Social) issues can directly impact our reputation as a Bank as well as our clients’ operations and the environment and communities where we and our clients operate. Thus, we will only engage in transactions with clients doing responsible businesses.
2. Credit underwriting follows the basic credit principles & best practices that include Know Your Customer (KYC) process, financial analysis, credit risk assessment, among others.
3. In addition, we take a look at environmental, social and governance (ESG) risks. If client is part of our ESG Exclusion List, the Bank will not pursue the transaction. If client is not part of the Exclusion List and is cleared following the Bank’s KYC process (inclusive of background checks and client call), the RM proceeds to collect the required client information/documents (which includes client’s Sustainability Report if required by government regulations) as well as accomplishing E&S Initial Screening which covers client & project information, and assigning the Risk Category of the client.
4. The credit assessment / preparation of credit proposal / E&S assessment stage includes the step whereby the ERM proceeds to check, among others, client’s history of E&S incidents, assessing E&S aspects of client’s project, and validating the Risk Categories which involves the following procedures and escalation process:
5. For Medium and High Risk accounts, more in-depth due diligence is required with the ERM needing to accomplish the E&S Due Diligence Questionnaire. The E&S Due Diligence covers questions related to the following topics: climate change, ecosystems pollution (air, waste & water), employee health & safety, and customer health & safety.
   • For Medium and High Risk accounts, more in-depth due diligence is required with the ERM needing to accomplish the E&S Due Diligence Questionnaire. The E&S Due Diligence covers questions related to the following topics: climate change, ecosystems pollution (air, waste & water), employee health & safety, and customer health & safety.
   • For Low Risk projects, no additional E&S assessment / due diligence is required.
6. The credit decisioning stage includes the step whereby the approving authorities discuss/assess the Credit Proposal (inclusive of the E&S Report) on the client.

 Following the ESRMS Policy, the Bank’s risk categorization is as follows:

1. Low Risk projects are projects with minimal or no adverse E&S risks and/or impacts.
2. Medium Risk projects are projects with adverse E&S risks and/or impacts that are few in number, generally site-specific, and can be easily identified. A mitigation plan/measure can be developed to address these risks.
3. High Risk projects are projects with significant adverse and/or long-term E&S risks and/or impacts that are diverse, irreversible and/or unprecedented. Prior to project implementation, the Bank will ensure that mitigation plan/measures are developed and can be effectively implemented. During implementation, if mitigation responses prove to be inadequate, the Bank maintains the right to hold disbursements or cease activities.