Purposeful Strategy
Task Force on Climate-related Financial Disclosures
TCFD Recommendation
Disclose the organisation’s governance around climate related issues and opportunities.
Recommended Disclosures
- Describe the Board’s oversight of climate related risks and opportunities.
- Describe the management’s role in assessing and managing climate related risks and opportunities.
The Board of Directors holds ultimate responsibility for the effective management of all risks and opportunities within the Bank including climate related risks and opportunities. The Bank has integrated the governance of climate-related risks and opportunities into its existing risk and sustainability governance frameworks as described below.
| Role and Responsibilities | ||
|---|---|---|
| Board Level | Board of Directors | Governs the effective management of the Bank’s climate-related risks and opportunities within the scope of the Bank’s broader risk management and sustainability strategies. |
| BoardSustainability Committee (BSC) |
The Board Sustainability Committee was established during the year under review, with the aim of strengthening the sustainable business practices of the Bank in adherence with the ESG principles applicable to the financial sector which include climate-related risks and opportunities. Following its establishment, the Committee developed its Terms of Reference, clearly defining its scope, objectives, duties, and meeting frequency to facilitate adequate oversight over the Bank’s sustainability practices which includes the effective management of climate-related risks and opportunities. Accordingly, the key responsibilities of the BSC include ensuring that appropriate strategies are in place to respond to the Bank’s sustainability related and climate related risks and opportunities, overseeing its implementation, and facilitating the incorporation of sustainability and climate related considerations in Main Board decisions related to the Bank’s strategy and risk management. The Risk Management Department, under the oversight of the Board Integrated Risk Management Committee (BIRMC) is responsible for identifying and developing quantitative tools for sustainability related and climate related risks and opportunities within the context of the Bank’s broader risk management framework. The members of the BSC participated in a comprehensive training programme on “How Climate Emergency Should Embed to the Bank’s Strategy” during the year under review. This programme covered best practices for integrating sustainability into business strategy. Board Sustainability Committee Composition
Secretary to the Committee – Company Secretary The BSC met 3 times during the year following its establishment in May 2024. |
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| Management Level | ESG Committee |
Facilitates the implementation of the Bank’s Board-approved strategies to address climate change within the scope of its sustainability strategy by liaising between the Board and the operational teams. The Committee is led by the Executive Director/Chief Financial Officer and comprises a cross-functional team of Corporate Management. Following its establishment, the ESG Committee developed a Terms of Reference to guide the implementation of sustainability initiatives approved by the Board Sustainability Committee as well as to monitor and address emerging sustainability regulations and developments. The members of the ESG committee participated in multiple training programmes on emerging sustainability regulations and best practices for integrating sustainability principles into business operations. ESG Committee Composition
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| Corporate Sustainability Department (CSD) |
Actively plans, implements and monitors climate impact management initiatives within the scope of the Bank’s overall sustainability strategy, including those under the oversight of the ESG Committee. During the year under review, the Bank strengthened the capabilities of the team through the recruitment of a Manager – Sustainability Reporting and a Sustainability Analyst. The Bank is also presently training a member of the CSD for the role of Internal Environmental Auditor. |
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| Executive Level | ESG Working Group | This cross-functional team comprises representatives from all business lines and support functions. The working group oversees the effective implementation of the Bank’s sustainability agenda which includes strategies to effectively manage climate-related risks and opportunities. |
| Credit Officers | Assess climate related risks and opportunities in accordance with the Bank’s ESMS when evaluating credit proposals. | |
| Group Level | Implementation Team | The implementation team comprising representatives from Finance and Sustainability Departments of all 4 Subsidiaries, was established to adopt the SLFRS S2 requirements. The team received comprehensive technical training to ensure effective execution of the Standards. |
TCFD Recommendation
Describe the actual and potential impacts on climate-related risks and opportunities on the organisation’s business, strategy and financial planning where such information is material.
Recommended Disclosures
- Describe the climate-related risks and opportunities that the organisation has identified over the short, medium and long term.
- Describe the impact on climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning.
- Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios including a 2°C or lower scenario.
A comprehensive assessment of the Bank’s sustainability related, and climate-related risks and opportunities is presently underway in alignment with the disclosure requirements of SLFRS Sustainability Standards S1 and S2. In the interim, the Bank wishes to disclose the identified climate-related risks and opportunities over the short, medium and long terms.
| Risks and Opportunities | Actual/Potential Impact | Short Term | Medium Term | Long Term | Action |
|---|---|---|---|---|---|
| Regulatory developments | Opportunities for early adoption and alignment with new regulatory requirements |  |
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| Climate-related knowledge and expertise | Risk of financial losses and/or reputational damage due to inadequate management of climate risk on lending exposures | |
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| Capital and funding | Risk of increased costs of capital and/or funding if climate risk is not adequately managed | |
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| Evolving customer preferences | Opportunities to develop innovative solutions that fulfill customer needs | |
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| Increasing stakeholder concerns on sustainable business practices | Risk of reputational damage given the negative perceptions of stakeholders | |
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| Rising frequency and intensity of acute and chronic climate-related events | Risk of unforeseen financial losses arising from increased exposure to climate-vulnerable sectors | |
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To address the Bank’s exposure to sustainability related risks and opportunities within its lending portfolio, sustainability considerations were incorporated into the assessment of credit proposals through the ESMS. The ESMS was developed with reference to a range of sustainability considerations including climate-related risks and opportunities identified as significant in regulatory and voluntary sustainability standards including, CBSL’s Sustainable Finance Roadmap, the SASB for Commercial Banking, Mortgage Finance and Consumer Finance, UNSDGs and GRI.
During the year under review, the Bank published its Board-approved ESG policy, which was developed by taking into consideration, regulatory and voluntary sustainability requirements as well as the Bank’s strategic objectives. The SLFRS S2 – Climate-Related Disclosures standard (based on IFRS S2) was carefully considered when developing our climate related commitments within the ESG policy. The ESG policy is supported by the Bank’s Environment and Social Management System policy and the CSR policy.
The Bank is also in the process of conducting a scenario analysis and developing stress testing models for identified shocks, to assess implications on its capital position and long-term resilience.
TCFD Recommendation
Disclose how the organisation identifies, assesses and manages climate-related risks.
Recommended Disclosures
- Describe the organisation’s processes for identifying and assessing climate related risks.
- Describe the organisation’s processes for managing climate related risks.
- Describe the processes for identifying, assessing and managing climate related risks are integrated into the organisation’s overall risk management.
Identification, assessment, mitigation, monitoring and reporting of the Bank’s climate-related risks and opportunities have been integrated into the Bank’s robust, Board-approved risk management framework. Please refer the Risk Management Report on pages 224 to 251 for more details. Identified climate-related risks and opportunities are assessed for impact and likelihood of occurrence in line with the Bank’s risk management protocols.
DEVELOPMENTS IN 2024
Recognising the significance of sustainability related risks and opportunities stemming from its lending portfolio, the Bank implemented its Board-approved Environmental and Social Risk Management System (ESMS) during the year under review. The Bank’s ESMS was developed in alignment with CBSL’s Sustainable Finance Roadmap, Green Finance Taxonomy and the prescribed activity list issued by the Central Environmental Authority. It was further supported by the IFC performance standards for managing environmental and social risks.
Sampath Bank’s ESMS incorporates its Board-approved ESMS Policy and published procedures and is designed to,
- Identify and evaluate the environmental and social impacts including climate related risks and opportunities on the Bank’s lending activities, to strengthen its understanding of the risks.
- Encourage and support borrowers on improving their environmental performance which includes climate related and social performance.
- Ensure compliance with international and relevant risk management practices thereby minimising the Bank’s exposure to environmental and social risks including climate related risks in private sector lending.
At present, the Bank’s ESMS policy and procedures applies to all project loans and other loans above Rs 100 Mn excluding consumption loans and schematised facilities and involves the categorisation of applicable facilities using the Environmental and Social Risk Categorisation Tool. This tool was developed internally based on the Central Environmental Authority’s prescribed activity list for environmental approvals and/or environmental protection licenses. Using this Tool, the Bank commenced categorising applicable credit facilities under four risk categories based on the severity of the adverse environmental impact including climate related and social impact.
The Bank is also in the process of developing a scorecard to incorporate sustainability risks into ICAAP under Pillar II and allocate capital if required.
Sampath Bank is also in the process of developing scenario analysis and stress testing models for identified shocks, to assess its impacts on capital and incorporate it into ICAAP.
A comprehensive assessment of the Bank’s climate related risks are presently underway to facilitate compliance with the requirements of SLFRS Sustainability Standards S2 next year.
TCFD Recommendation
Disclose the metrics and targets used to assess and manage relevant climate related risks and opportunities where such information is material.
Recommended Disclosures
- Describe the metrics used by the organisation to assess climate related risks and opportunities in line with its strategy and risk management process.
- Disclose Scope 1, Scope 2 and if appropriate Scope 3 greenhouse gases (GHG) emissions and the related risks.
- Describe the targets used by the organisation to manage climate related risks and opportunities and performance against targets.
To integrate sustainability into strategic decision making and support long term value creation, the Bank has incorporated sustainability milestones including those related to climate change in Key Management Personnels' Key Performance Indicators (KPIs) for FY 2025. The milestones established for KMPs will be cascaded to implementation teams to facilitate achievement, with performance evaluated against these targets at the year end. The Bank is in the process of revising its Reward Management Policy for KMPs to incorporate a reward mechanism for the achievement of sustainability milestones.
To strengthen monitoring of sustainability related metrics including climate related metrics, the Bank commenced developing a Sustainability Dashboard during the year under review. The metrics included in the dashboard were derived from an analysis of various sustainability indicators including climate-related metrics identified in voluntary sustainability standards such as GRI and SASBs. The dashboard provides insights into the Bank’s performance on key social and environmental metrics including energy and water consumption, enabling the identification of deviations and the implementation of corrective strategies. This database will also serve as the foundation for further analysis using analytical software, facilitating informed decision making to achieve the Bank’s sustainability goals.
The Bank has been preparing a GHG Inventory Report annually since 2013. Measurement of GHG emissions encompasses its head office and its 229-branch network. The GHG Inventory Report is independently verified in accordance with ISO 14064-1:2018. The Bank’s Carbon footprint for 2024 is given below.
16 hrs
of training per selected employee637 hrs
of training| GHG Emissions (tCO₂e) in 2024 | |||||
|---|---|---|---|---|---|
| Scope | CO₂ | N₂O | CH₄ | HFC | Total Emissions |
| Direct GHG Emissions (Scope 1) | 713 | 11 | 2 | 15 | 741 |
| Indirect GHG Emissions (Scope 2) | 5,962 | - | - | - | 5,962 |
| Other Indirect GHG Emissions (Scope 3) | 2,797 | 16 | 5 | - | 2,818 |
| Total GHG Emissions (tCO₂e) | 9,472 | 27 | 7 | 15 | 9,521 |
| GHG Emissions (Per Employee) | 2.15 | ||||
| 2024 | 2023 | YoY Change | |
|---|---|---|---|
| Total GHG Emissions (tCO₂e) | 9,521 | 10,378 | -8% |
The metrics are linked to the SASB standards for Commercial Banks, Consumer Finance and Mortgage Finance excluding sensitive information, GRI material topics and UN Sustainable Development Goals.