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Where customer practices may not be consistent with ANZ’s policies and processes, we aim to work with them to understand their circumstances and, where necessary, encourage them to identify specific and time-bound improvement plans. If prospective or existing customers are unwilling to adapt their practices in an appro...
We also engage in public policy discussion on climate change, where appropriate, and seek to increase the transparency of our approach to climate change by disclosing our membership of key industry bodies.
Timeframe: S M L.
Acute physical risk.
Customers’ exposure to acute climate-related events may adversely affect collateral we hold to secure credit facilities extended to those customers. To manage this risk, for example, ANZ requires property over which it holds a residential home loan to be appropriately insured for the period of that home loan.
Timeframe: S M L.
Chronic physical risk.
We support a range of agribusinesses across Australia and New Zealand. Agriculture requires specific weather and soil conditions, and farmers congregate in locations that have historically provided the right environment. As the climate changes, some customers might find that with the magnitude or frequency of the clima...
We recognise the need to understand how customers manage their land and natural environment, including our customers’ plans for a changing climate.
Timeframe: M L 1. Transactions involving our Institutional and Corporate customers.
How is ANZ exposed to nature-related risk, including biodiversity loss?
Nature-related risk, including biodiversity loss, for example as a result of species extinction or decline, or ecosystem degradation and nature loss, is an emerging risk that the Group is seeking to understand further.
Biodiversity risks are closely linked to climate-related risks and for ANZ are likely to arise primarily through our exposure to customers that have material dependencies and/or whose actions may have negative impacts on nature, including biodiversity.
In addition to physical risks associated with biodiversity loss, risks can also arise from changing societal preferences and regulatory or policy changes, including potential reforms to halt and reverse forest loss, species extinction and land degradation.
These changes may affect the Group directly, but the greater impact is likely to be through the impact of these changes on some of the Group’s customers.
We are seeking to understand how our customers are managing and disclosing their impacts and dependencies on nature, for example, through our customer engagement program (see pages 22-24).
Long term L Medium M Short S.
Overview.
Governance.
Strategy.
Risk Management.
Climate-related risk.
Risk management framework.
Policies and processes.
Integrating climate risk.
Physical risk.
Metrics and Targets.
Appendix.
Assurance opinion.
ANZ 2023 Climate-related Financial Disclosures 35
Our approach to climate-related and biodiversity risks.
ANZ’s approach to identifying, measuring, evaluating, monitoring and reporting risk, including climate-related risk and biodiversity, is set out in our Risk Management Framework (RMF), which describes how the Group manages all risk types.
Further detail on our risk types is available in the Risk Management section of our 2023 Annual Report available at anz.com/annualreport.
Climate change risk is managed and monitored as part of ANZ’s business, strategic and capital management processes.
While for ANZ climate change risk primarily manifests as a financial risk, especially credit risk, it may also result in additional market, operational or other risks. Our key material risk category of Credit Risk considers the risks associated with lending to customers that could be impacted by climate change, includi...
Our approach to nature-related risk including biodiversity loss.
Biodiversity risk is considered an emerging risk under our RMF compared with other areas of risk and is recognised in our Climate Change Commitment. ANZ seeks to understand emerging risks as they evolve and assess potential impacts on the Group.
Our risk management framework.
The following provides an overview of the role that our RMF plays in ANZ’s overall risk management approach and includes detail on how climate-related risk is being integrated into this approach.
The Board is ultimately responsible for establishing and overseeing the Group’s RMF which is supported by the Group’s underlying systems, structures, policies, procedures, processes and people. The Board has delegated authority to the Board Risk Committee (BRC) to develop and monitor compliance with the Group’s risk ma...
The Committee reports regularly to the Board on its activities. The key pillars of the Group RMF include: • The Risk Management Strategy (RMS), which describes the approach for managing risk arising from the Group’s purpose and strategy. The RMS is reviewed and reset annually at a minimum. The RMS includes: – an explan...
It also includes information on how the Group identifies, measures, evaluates, monitors, reports and then either controls or mitigates material risks and the oversight mechanism and/or committees in place.
• The Risk Appetite Statement (RAS), sets out the Board’s expectations regarding, for each material risk, the maximum level of risk that the Group is willing to accept in pursuing its strategic objectives and its operating plans considering its shareholders’, depositors’ and customers’ interests. The RAS is reviewed an...
• The Risk Culture principles are a subset of the Group’s organisational culture and an intrinsic part of the Group’s RMF.
The Group operates a Three Lines-of-Defence Model in regard to risk management, helping to embed a culture where risk is considered everyone’s responsibility. See our 2023 Annual Report for further details available at anz.com/annualreport.
The governance and oversight of risk management, while embedded in day-to-day activities, is also the focus of committees and regular forums across the Group. The committees and forums discuss and monitor known and emerging risks, review management plans and monitor progress to address known issues. See our Annual Repo...
Overview.
Governance.
Strategy.
Risk Management.
Climate-related risk.
Risk management framework.
Policies and processes.
Integrating climate risk.
Physical risk.
Metrics and Targets.
Appendix.
Assurance opinion.
ANZ 2023 Climate-related Financial Disclosures 36
Overview of how Social and Environmental Risks (including climate and nature-related risks) are incorporated into our policies and procedures.
Policy.
We regularly review our lending practices and policies, in light of current and emerging social and environmental issues.
These potential social and environmental issues associated with lending to customers are also typically considered by our management Ethics and Responsible Business Committee (ERBC) and Board Ethics, Environment, Social and Governance (EESG) Committee. See page 8 for further details on our governance structures.
We seek to assess and manage the impacts of our lending decisions through the application of our Social and Environmental Risk Policy (the Policy) and accompanying requirements including for ‘sensitive sectors’:
ENERGY.
EXTRACTIVE INDUSTRIES.
FORESTRY AND FORESTS.
HYDROELECTRIC POWER.
MILITARY EQUIPMENT.
WATER.
The Policy outlines the social and environmental factors to be taken into account by our bankers when considering large business1 transactions. It incorporates our approach to human rights, including our ‘zero tolerance’ for land acquisition and involuntary resettlement that we consider improper, as well as labour righ...
We review the Policy at least every three years, with oversight from our ERBC to ensure it remains fit-for-purpose. The review takes into account changes to customer practices, international standards, emerging social and environmental issues, and stakeholder feedback.
In 2023, we improved our credit risk assessment process via our Online Customer Profile platform by integrating our Social and Environmental Risk screening tool for large business customers. This allows us to improve our identification of financial and non-financial risks (including reputational risk) we may face throu...
Due diligence.
Prior to entering into a relationship with a large business customer or entering into any new material transaction, bankers are expected to consider the customer's management of its material social and environmental issues and any associated potential impacts. Bankers must also consider the customer’s history of, and a...
Under our credit policy we review our large business customers at least annually. This includes the consideration of issues specified in our Social and Environmental Risk Policy and, where relevant, sensitive sector requirements. We expect our customers in all sectors to implement appropriate stakeholder engagement str...
The ERBC considers the social and environmental impacts of the industries, customers and communities ANZ serves. The ERBC is responsible for overseeing the ERBC Sub-Committee for sensitive wholesale transactions. The rationale for each decision relating to any escalated transactions is provided to the ERBC for oversigh...
Further, we seek to apply enhanced due diligence and decision-making processes to customers and transactions in the energy sector via our Energy Transactions Escalation Process, see page 11 for further detail.
In line with our Social and Environmental Risk Policy we expect large business customers to use, or migrate towards, internationally accepted industry practices to manage social and environmental impacts, including potential impacts on nature including biodiversity. The Policy has accompanying requirements, including o...
Through the application of our Forestry and Forests and Water policies, we seek to support customers who are improving their forestry and water management practices.
Our Land Acquisition Statement states that we will not knowingly support customer activities that significantly impact on culturally or environmentally sensitive areas, including: World Heritage Areas, wetlands on the Ramsar list, designated national parks and conservation areas, activities that threaten species listed...
1. Transactions involving our Institutional and Corporate customers.
Overview.
Governance.
Strategy.
Risk Management.
Climate-related risk.
Risk management framework.
Policies and processes.
Integrating climate risk.
Physical risk.
Metrics and Targets.
Appendix.
Assurance opinion.
ANZ 2023 Climate-related Financial Disclosures 37