Management Oversight Our ESG Steering Committee is focused on the design and execution of our approach to integrate climate factors into our strategy and operations, as part of the development of a comprehensive approach to sustainability. The ESG Steering Committee consists of each member of our executive team, and is supported by our sustainability team, who engages with internal stakeholders and works closely with the GRM function to establish appropriate working groups tasked with the development of various components of our approach to climate change. Our Executive Risk Committee provides oversight of our developing approach to identify, assess, monitor and report on climate-related risks, with support and input from the GRM function. Strategy We recognize that we have a part to play in Canada’s transition to net-zero emissions by managing our direct and indirect climate impact, exploring ways to support our clients in achieving their climate goals and mitigating the risks associated with climate change. As we progress the development of our sustainability approach, our strategy will incorporate short-, medium-, and long-term goals targeted to address specific climate-related issues that could have a significant financial impact on our operations, or the operations of our clients. We are committed to measure and manage our greenhouse gas emissions, with an initial focus on our operational emissions across our national footprint, to support our ability to develop meaningful and supportable reduction targets in the future. In addition to continued efforts to measure and manage our own carbon footprint, we are focused to develop a deeper understanding of the risks and opportunities that climate change presents for our clients. To better understand these risks and opportunities, we are expanding our greenhouse gas emissions estimates to encompass the financed emissions within our lending portfolio, using a phased approach with consideration for data and measurement methodology limitations. Through this process, we will continue to assess the credibility, reliability, comparability and decision-making usefulness of greenhouse gas emissions estimation approaches and data sources and consider how they may be leveraged as we enhance our approach to climate risk management. To remain well-informed on climate-related issues and emerging trends and support the development of our approach to climate change, our teams provide representation on industry groups and national and local climate-related programs. We participate in the Sustainable Finance Action Council, which advises on movement towards mandatory climate change disclosures, the development of a climate risk taxonomy within the context of Canada’s capital markets and addressing the climate data needs and capacity within the financial sector. Risk Management Climate risk is a subset of environmental risk that encompasses the risk of financial loss or reputational damage that results from the physical and transition impacts of climate change, which may adversely impact our operations, or the operations of our clients. • Transition to a lower-carbon economy may entail extensive policy, legal, technology, and market changes to address mitigation and adaptation requirements related to climate change. Depending on the nature, speed, and focus of these changes, transition risks may pose varying levels of financial and reputation risk to organizations over time. • Physical risks related to climate change can be event-driven or due to longer-term shifts in climate patterns. Physical risks may have financial implications for organizations, such as direct damage to assets and indirect impacts from supply chain disruption. We have limited direct physical risk exposure based on our modest physical footprint through banking centres and corporate office space across Canada. We regularly monitor, assess and revise our business continuity approach and response to ensure our ability to maintain critical operations through periods of business disruption. We have minimal indirect physical and transition risk exposure through our current lending activities, although we expect this risk will evolve and emerge over time. Our lending portfolio diversification by geography and industry has increased significantly over the past several years, which mitigates the risk of over-exposure to any one sector or region that might be exposed to climate-related risks. We continue to advance our capabilities and approach to climate-related risk management. Our Risk Management framework incorporates social and environmental risk within our risk universe and climate-related risk is included in our Risk Register to facilitate the assessment of the level of inherent risk, control effectiveness and residual risk. In 2023, we expanded our social and environmental risk management function within GRM to lead continued advancement of our risk management practises to support identification, management, and reporting of climate-related risks and integration of climate-related risks into our policies and procedures. Metrics and Targets As we continue our adoption of the TCFD recommendations, we are committed to identify, measure, and disclose climate-related metrics and targets, beginning with a focus on greenhouse gas emissions across our operational footprint, followed by a phased disclosure approach related to financed emissions within our lending portfolio. We are also committed to manage our operational footprint through practices targeted to benchmark and reduce the amount of energy we consume, increase materials recovered and recycled, and manage ecological maintenance products. As we expand our banking centre footprint and upgrade existing locations, we maintain a focus on sustainability and opportunities to reduce our environmental impact. Progress on our approach to climate change, including the development of related metrics and targets, is further discussed within our Sustainability Report located on our website at www.cwb.com/sustainability-reports.
56 | CWB Financial Group 2023 Annual Report
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