ESG Risk Management
How Commerzbank integrates environmental, social and governance risks into its risk management
The purpose of risk management is to safeguard the Bank’s financial stability and ensure that liquidity risks remain manageable at all times. Environmental, Social and Governance (ESG) risks are an integral part of the Bank’s risk management framework.
Sustainability and ESG are widely used terms. Sustainability describes a forward-looking perspective in which environmental, social and economic aspects are considered over the long term in order to preserve the foundations of life and business for future generations. In the corporate and financial sectors in particular, these aspects are commonly summarized under the term ESG (Environmental, Social and Governance). Sustainability is defined differently across regulatory, scientific, and economic contexts. Regulatory requirements, such as the EU Taxonomy or the EU Sustainable Finance Disclosure Regulation, provide a framework for individual sustainability aspects while leaving room for company-specific specification.
The specific meaning of sustainability for Commerzbank AG’s products, services, and business activities is set out in the ESG Framework. It defines the relevant criteria and distinguishes, in particular, between the Bank’s own business and external client investment and insurance business, including asset management and securities business (“third-party business”).
Managing ESG risks
Environmental, social and governance risks can affect many areas of the Bank’s business. These include climate-related risks and risks arising from biodiversity loss. Commerzbank therefore considers these risks across all material risk types, including credit risk.
These risks are managed in accordance with the Three Lines of Defence model. Under this model, the business units constitute the first line, independent control functions such as Risk Management and Compliance constitute the second line, and Internal Audit constitutes the third line. Each line has clearly defined and distinct responsibilities for managing and monitoring risks.
The "ESG Risk & Portfolio Emissions Oversight" unit performs the central oversight function within Risk Management. The relevant risk units are responsible for the operational management of these risks.
Measuring ESG risks
Within the risk inventory, we conduct a comprehensive and cross-risk-type materiality analysis for ESG risks on a yearly basis.
This is in line with Commerzbank's consistent strategic orientation towards environmental, social and governance targets (for more details, see ESG Framework).
For the risk types materially affected by ESG risks, we ensure ICAAP consideration within the overall risk strategy. More detailed information on the methodology and results of the materiality analysis can be found in the ESG Annex of the disclosure report.
Individual risk analysis at customer level
, Climate taken into account when granting loansWe combine findings from scenario analyses with an individual risk analysis for managing the effects of climate risks in our lending business. At customer level, we consider the specific impact of climate risks and the resilience to them.