Climate-related Risk Management We recognise climate change as a systemic risk that presents significant financial and non-financial implications for our customers, operations, and ultimately, our ability to deliver long-term value to stakeholders. With this in mind, we continually enhance our capabilities for identifying, assessing, measuring, and monitoring climate-related risks. These efforts are integrated into our overarching risk management framework and guided by BNM’s regulatory policies, including the CCPT, the CRMSA Policy Document, the 2024 CRST Exercise Methodology Paper, and BNM’s TCFD Application Guide. Robust climate governance processes are in place to ensure we remain aligned with evolving regulatory and industry standards, both locally and globally. Since 2022, we have progressively introduced qualitative climate-related risk appetite statements, outlining our approach to managing climate-related risks, climate sensitive sectors, CRST, and climate-related targets. As part of our phased approach, we will continue to adopt risk appetite metrics to address climate-related challenges effectively. Identifying and Assessing the Impact of Climate-Related Risks In 2024, we institutionalised the Group Climate Risk Management Framework to formalise our approach to managing climaterelated risks. The framework provides: In our Risk Library, climate-related risk is defined as potential threats arising from climate change, its associated impacts, and the resulting economic and financial consequences. These risks are categorised into three sub-risk types: Economic costs and financial losses resulting from the increasing severity and frequency of extreme weather events, longer-term gradual shifts of the climate and indirect effects of climate change such as loss of ecosystem services. Risks related to the process of adjustment towards a low carbon economy, such as changes in public sector policies, legislation and regulation, changes in technology and changes in market and customer sentiment. Risks stemming from parties that are seeking compensation for losses these parties may have suffered from the physical or transition risks from climate change. Physical Risk Transition Risk Liability Risk A comprehensive outline of overall approach to climate-related risk management. A summary of how climate risks are transmitted and their impact on other primary risk types. A clear definition of roles and responsibilities under the Three Lines of Defence model to ensure effective climaterelated risk management. Bank Islam Malaysia Berhad ◆ Integrated Annual Report 2024 130 Sustainability Statement
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