Strategy for dealing with sustainability risks
The world is getting warmer – and we can all do something about it. That is why most of the world's countries have decided to reach an agreement to keep the global temperature rise to well below 2 degrees Celsius: The Paris Climate Agreement1 aims to ensure that future generations can also live on a healthy planet.
In order to achieve this target of 2 degrees, the European Commission has published a comprehensive action plan for financing sustainable growth2 and the European Green Deal .3
An important part of this action plan is to make the information for participants in the financial market, i.e. financial market customers, simpler and easier to understand. In technical jargon, this is known as "information asymmetry". These information asymmetries are to be eliminated through mandatory pre-contractual information and ongoing disclosures by financial market participants and financial advisors to end investors.
Regulation (EU) 2019/2088 on sustainability-related disclosure requirements in the financial services sector (Disclosure Regulation) also requires financial market participants and financial advisors to publish written strategies for the integration of sustainability risks.
According to this "Disclosure Regulation", a sustainability risk is an event or requirement (environmental, social or governance) that could have an actual or potential material negative impact on the value of an investment.4
As climate change continues to accelerate, the focus is increasingly shifting to climate risks in particular. These are risks that arise as a result of climate change or that are exacerbated by climate change.5
A distinction can be made between physical risks and transition risks. Physical risks arise directly from the consequences of climate change. Transition risks are those risks that arise from the transition to a climate-neutral and resilient economy and society, and can therefore lead to a depreciation of assets. Examples of sustainability risks are increased occurrence of natural disasters, loss of biodiversity, decline in snow cover, extreme drought, etc. Sustainability risks can manifest themselves in an investment in the familiar risk categories such as credit risk, risk of total loss and price risk.
However, it is not only sustainability risks themselves that play a role. Sustainability factors must also be taken into account when making investment decisions. The Disclosure Regulation defines sustainability factors as environmental, social and employee concerns, respect for human rights and the fight against corruption and bribery. These include, for example, climate protection, the protection of biodiversity, compliance with recognised labour law standards, appropriate remuneration, measures to prevent corruption, etc.
In the following section, we would like to provide an overview of the general handling of sustainability risks at corporate level as well as of our methods and processes.
Active management
As a bank, the services we offer (portfolio management, investment and insurance advice) mean that we fall under the definition of both a financial market participant and a financial advisor within the meaning of the Disclosure Regulation. The Disclosure Regulation stipulates certain disclosure obligations for both activities.
Investment advice
Both sustainable financial products and products whose underlying investments do not take into account the EU criteria for environmentally sustainable economic activities are offered.
If an offer is available from the respective product manufacturer, the information on the sustainability risks of the product manufacturer is made available and explained in more detail to the customer during the advisory meeting.
The customer is informed about the expected effects of sustainability risks on the return of the financial products offered.
Insurance advisory
As part of our insurance advisory, we have an exclusive cooperation with ERGO Versicherung AG and insurance-based investment products (IBIP) are sold.
We include sustainability risks in our insurance advice in accordance with the Disclosure Regulation as follows:
In the case of financial products, sustainability risks are identified by the product manufacturer (financial market participant). Insurance advice is based on the information provided by the product manufacturer. During the advisory talk, the customer is provided with information on the product manufacturer's sustainability risks and these are explained in more detail. The customer is informed about the expected impact of sustainability risks on the return of the financial products offered.
Further information on sustainability can be found at https://ergo-versicherung.at/ergo-oesterreich/verantwortung (in German)
Information on selectable funds (factsheets) can be found at https://ergo-versicherung.at/fonds (in German)
Portfolio management
We include sustainability risks in investment decisions as part of portfolio management as follows, if this has been contractually agreed with the customer (applies to VM Exklusiv):
The identification of sustainability risks depends on the type of financial instrument to be included in the portfolio.
With regard to other financial instruments (such as shares and bonds) that are to be included in the portfolio, various sustainability data such as the non-financial reporting of the investment companies are used to obtain assessments of the sustainability risks of these financial instruments. The economic sector of the investment companies (issuers) is also taken into account. In addition, external research partners are consulted before financial instruments (shares) are included in order to obtain assessments of the sustainability performance of the issuers and their exposure to sustainability risks. When using external rating providers, Bank Austria receives detailed indicators, findings and weightings from the provider (corporate bonds, etc.) for a portfolio, as well as further sustainability data (such as ESG ratings from external research partners) to obtain assessments of the sustainability performance of the issuers and their exposure to sustainability risks. If external rating providers are used, Bank Austria receives detailed indicators, findings and weightings from the provider. The external ESG ratings are updated on an ongoing basis in order to enable Bank Austria to respond to key developments.
Consideration of sustainability risks is part of portfolio management and is taken into account at an early stage when selecting potential financial instruments and financial products. As a matter of principle, care is taken to minimise sustainability risks in portfolio management. Our portfolio managers ensure that risks are spread at portfolio level,
The following methods are used to actively manage sustainability risks:
- Minimum criteria:
Our portfolio managers ensure that only financial instruments from companies with internally defined minimum criteria are included in a portfolio. In this way, companies with poor sustainability performance or high sustainability risks are excluded from the investment universe. - Financial instruments with good sustainability performance:
Our portfolio managers ensure that financial instruments with good sustainability performance are included in each portfolio. In this way, companies with low sustainability risks are actively integrated. - Divestment:
In the case of existing portfolios, a strategic adjustment is made over the longer term to the strategy for dealing with sustainability risks (exit from particularly risky financial instruments, integration of financial instruments with low sustainability risks).
The client is informed about the expected impact of sustainability risks on the return of his managed portfolio.
Measures for implementation and control
Knowledge of sustainability risks and factors is essential. We have therefore put together a training course on this topic and included it in the regular training programme for our employees (relationship managers and asset managers).
It is planned that all relationship managers will have completed the first training course on sustainability risks by the end of 2021.
The strategy described here will be successively implemented in 2021 and reviewed annually.
Developments at European and national level with regard to sustainability risks and factors and the related requirements for the financial industry are monitored on an ongoing basis. This strategy may be adjusted due to changes in the legal framework and improvements in the data situation and available methods.
As of 26 February 2021
Overview of sustainability criteria – comparison of Bank Austria over time:
Comparison of ESG criteria version 5 as at October 1, 2024 (PDF)
Comparison of ESG-criteria version 4 as of April 1, 2024 (PDF)
Comparison of ESG-criteria version 3 as at January 29 (PDF)
Comparison of ESG-criteria version 2 as at October 30, 2023 (PDF)
Comparison of ESG-criteria version 1 as of February 1, 2022 (PDF)
Disclosure pursuant to Article 5 Regulation (EU) 2019/2088*
At UniCredit value creation means more than just generating financial value. It also means ensuring sustainability is at the heart of all that the Group does.
In 2024, UniCredit announced its 2030 target for the steel sector, which forms part of the bank’s commitment to reach its 2050 goal of Net Zero on its lending portfolio and enhances its own 2030 targets for the three most carbon intensive sectors which include Oil & Gas, Power Generation and Automotive sectors, communicated to the market in 2023. This is in line with the Net Zero commitment the bank signed in October 2021 and its continued support for a more sustainable global economy.
The Remuneration Policy contributes to the UniCredit strategy, the pursuit of long-term interests and sustainability over time. UniCredit has a remuneration structure in place that is based on risk-adjusted/related performance and does not encourage excessive risk-taking, including with respect to sustainability risks.
Further, one of the pillars of the Group Remuneration Policy addresses sustainable pay for sustainable performance, by maintaining consistency between remuneration and performance, and between rewards and long-term stakeholder value creation, as well as enhancing both the actual results achieved and how they are achieved.
Several processes and initiatives support the link between the remuneration policy and sustainability.
The Group Incentive System is supported by the annual performance management process assuring coherence, consistency, and clarity of performance objectives and behavioral expectations aligned with business strategy. The setting of annual objectives (known as Goal Setting) is the initial phase of this process and is supported by a structured framework that includes a catalogue of performance indicators (the “KPI Bluebook”), annually reviewed by relevant Group key functions (e.g. People & Culture, Finance, Risk Management, Group Strategy & ESG), and guidelines. The framework is in line with regulatory provisions and Group standards as verified by Compliance. In particular, among other things, this is characterized by:
- the use of risk-adjusted/related goals (e.g. at least one KPI in the goals cards);
- the link with ESG and Diversity, Equity & Inclusion (“DE&I”) strategies (e.g. at least one ESG KPI for all Group Material Risk Takers with a particular focus on DE&I KPIs for staff reporting to Group Executive Committee and their direct reporting line);
- the use of sustainability goals for value creation over time (e.g. about half of the goals shall be related to sustainability). For selected individuals (see chapter 5.1.4) ESG goals are included as additional long term conditions;
- the use of goals related to business, corporate values, conduct and compliance/risk culture, with a focus on:
- adherence to and spreading of Group culture, values and purpose;
- setting the proper tone from the Top and tone from the Middle on Compliance culture and Risk mindfulness.
Locally, UC Bank Austria follows Group processes and initiatives in order to support the link between the remuneration Policy and the sustainability strategy.
Focus – Diversity, Equity and Inclusion (DE&I)
At UniCredit Diversity, Equity and Inclusion are strategic assets for our business, growth, innovation, and performance, acting as an integral part of our corporate culture and firmly engrained in our ESG roadmap.
We are building a culture that puts our Values of Integrity, Ownership and Caring at the heart of our decision-making and in everything we do. Our Culture and these Values embody what we stand for, determine how we act, and shape the decisions that we make every day, guiding all our actions and behaviours.
This also helps ensure a more sustainable growth in the long-term and new business opportunities, a strong drive for innovation and creativity, as well as a general improvement of the work environment with positive impact on productivity, well-being, and engagement of our people.
To further promote a culture of inclusion based on equal opportunities and non-discrimination, UniCredit has a dedicated DE&I Global Policy in place that sets clear guidelines and principles for employees as well as third parties. The Policy applies to every key moment of the employee journey, from recruiting and onboarding, to learning and development, performance management and compensation, ensuring bias-free, merit and competency-based decisions as well as pay equality, regardless of diversity traits.
Our Code of Conduct highlights the principles of inclusion encompassing the criteria of objectivity, competence, professionalism, and equal opportunities both in people-related processes laying down the procedures by which any instances of discrimination, mobbing or bullying are dealt with, and in external relations with counterparties.
Within the framework provided by the Group Remuneration Policy, UniCredit is committed to an equal pay principle, ensuring fair treatment in terms of remuneration based on the role covered, the scope of responsibilities, performance outcomes and the overall quality of the contribution to business results, regardless of gender identity, age, race, ethnicity, sexual orientation, ability, and cultural background. UniCredit adopts gender-neutral Remuneration and Incentive policies that contribute to pursuing true equality among staff. They ensure that equal work is matched by equal pay, giving people the same access to opportunities, regardless of their diversity strands.
By signing the CEO Champion Commitment “Towards the Zero Gender Gap”, the Group is affirming its corporate commitment with concrete objectives and a framework to move towards greater gender equality, diversity and inclusion in our Bank.
UniCredit is committed to promote gender parity across all organizational levels, ensuring balanced gender distribution in talent pools, hiring and recruiting, appointments and promotions, with a wider ethnic representation as well as guaranteeing a diverse and sustainable Succession Pipeline.
Further testifying to our extensive collective efforts to fostering a more diverse and sustainable workplace, UniCredit is the first pan-European bank to win a Global EDGE Certification for gender equity and inclusion, involving more than 80% of our population in the countries where the bank is present.
The Group has long underscored the importance of gender pay equality and several initiatives have been implemented across the Group to address pay differences, including guidelines for our compensation process, allocation of salary budgets as well as specific ambitions related to DE&I (i.e. promote gender parity across all organizational levels, in talent pools, hiring and recruiting, ensure equal pay for equal work, increase cultural and ethnic diversity in our staff) assigned to senior leaders within the annual goal setting process.
Focus – ESG – Environmental, Social & Governance
Sustainability is a key lever for our future business strategies and a critical component of our success. Indeed, we have set ambitious ESG targets as part of the 2022-2024 Strategic Plan, as the Group continues to make progress on its Net Zero commitments and embed ESG in all areas of the business while strengthening corporate culture under the common purpose of empowering our communities to progress.
Our remuneration policy has been developed to support UniCredit’s sustainability strategy. A core set of our ESG targets are embedded in the CEO performance scorecard to foster the alignment of management with the Group’s current and future ESG ambitions.
* Since the last publication of the herewith Disclosure pursuant to Article 5 Regulation (EU) 2019/2088 in 2021, the commitment to Sustainability and integration of sustainability risks into its remuneration policies have been further developed, the information updated and explained in more detail in November 2024.
| 1 | https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement |
| 2 | https://ec.europa.eu/info/publications/sustainable-finance-renewed-strategy_en#action-plan |
| 3 | https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en |
| 4 | See Art. 2 No. 22 of the sustainability-related disclosure regulation |
| 5 | See FMA - Financial Market Authority Guidelines for Dealing with Sustainability Risks (01/2020) |
