2021 UN-PRB Report: Principles for Responsible Banking

Reporting and Self-Assessment 2023

Principles for Responsible Banking

UNEP FI Principles

for Responsible Banking

The following table sets out the reporting and self-assessment requirements for Signatories of the Principles for Responsible Banking. Signatory banks need to report on their implementation of the Principles the first time within latest 18 months after signing and annually thereafter (in line with their annual reporting cycle).

How to use this template:

This template does NOT require your bank to produce an additional report. Rather, this template is designed for your bank to provide references / links to where in your existing reporting / public domains the required information can be found. The aim is to keep additional reporting burden to a minimum while ensuring transparency and accountability as set out in Principle 6.

Within this reporting template, there are six areas for self-assessment that are key to showing that your bank is fulfilling its commitments as a signatory of the Principles for Responsible Banking. They are highlighted.

1. Impact Analysis
2. Target Setting
3. Plans for Target Implementation and Monitoring
4. Progress on Implementing Targets
5. Governance Structure for Implementation of the Principles
6. Progress on Implementing the Principles for Responsible Banking

Only for these six highlighted items, it is required that:

1. An assurer provides limited assurance of your self-assess- ment. You can do this by including it in your existing as- sured reporting. Where third-party assurance is not fea- sible, an independent review may be conducted.
2. You provide your bank's conclusion/statement if it has ful- filled the respective requirements.

Accommodating different starting points:

Banks have different starting points and operate in different contexts. Your bank may not be able to provide all information required in this template the first time you report. That is fine. Your bank has up to four years from signing to bring its reporting fully in line with the requirements. Feedback, support and peer learning are available to all signatory banks to help them progress with both implementation and re- porting.

Reporting / Self-Assessment Requirements High-level summary of bank's response

References

Principle 1: Alignment

We will align our business strategy to be consistent with and contribute to individuals' needs and society's goals, as expressed in the Sustainable Development Goals, the Paris Climate Agreement and relevant national and regional frame- works.

1.1Describe (high-level) your bank's busi-	Founded in 1861, Liechtensteinische Landesbank AG is the longest-	TCFD 2021
ness model, including the main custom-	established financial institute in the Principality of Liechtenstein.	(P. 4‒5)
er segments served, types of products	As at 31 December 2021, its business model is based on three market
and services provided, the main sectors	divisions:	AR 2021
and types of activities, and where rele-	1)  Private and Corporate Clients, which comprises universal banking	(P. 12)
vant the technologies financed across	business
the main geographies in which your	2)  Private Banking, which comprises investment advice, asset man-
bank has operations or provides prod-	agement and asset structuring
ucts and services.	3)  Institutional Clients, which comprises intermediary and fund busi-
	ness as well as the asset management department of the LLB Group
	The LLB Group operates primarily in central Europe, where it has
	three banks: in Liechtenstein, Liechtensteinische Landesbank AG;
	in Switzerland, Bank Linth LLB AG;
	and in Austria, Liechtensteinische Landesbank (Österreich) AG.
1.2Describe how your bank has aligned and /	In October 2021, the LLB Group presented its new ACT-26 strategy.	AR 2021
or is planning to align its strategy to be	In addition to traditional economic components, i.e. growth and effi-	(P. 18, 55, 60)
consistent with and contribute to socie-	ciency, sustainability is now embedded as a core element for the first
ty's goals, as expressed in the Sustainable	time in the company's history.	TCFD 2021
Development Goals (SDGs), the Paris Cli-		(P. 10‒19)
mate Agreement, and relevant national	To the LLB Group, sustainability means creating long-term added value
and regional frameworks.	for its clients, shareholders, employees and other stakeholder groups.
	This also includes its intention to achieve full climate neutrality by
	2040 at the latest, i.e. ten years earlier than envisaged under the Paris
	Agreement. In addition to climate targets, other United Nations Sus-

tainable Development Goals (UN SDGs) will be taken into account through a holistic environmental, social and governance (ESG) ap- proach.

As part of the ACT-26 strategy, the Group is taking part in the following initiatives: UN Principles for Responsible Banking (UN PRB), Net-Zero Banking Alliance (NZBA), UN Global Compact and The Climate Pledge. In addition, the Group has committed itself to the climate frameworks and standards of the Task Force on Climate-related Financial Disclosures (TCFD) and the Partnership for Carbon Accounting Financials (PCAF).

Reporting / Self-Assessment Requirements High-level summary of bank's response

References

Principle 2: Impact and Target Setting

We will continuously increase our positive impacts while reducing the negative impacts on, and managing the risks to, people and environment resulting from our activities, products and services. To this end, we will set and publish targets where we can have the most significant impacts.

2.1  Impact Analysis

Show that your bank has identified the areas in which it has its most significant (potential) positive and negative impact through an impact analysis that fulfills the following elements:

◆Scope: The bank's core business areas, products / services across the main geographies that the bank operates in have been as described under 1.1. have been considered in the scope of the analysis.

◆Scale of Exposure: In identifying its areas of most significant impact the bank has considered where its core business / its major activities lie in terms of industries, technologies and geographies.

◆Context & Relevance: Your bank has taken into account the most relevant challenges and priorities related to sustainable development in the countries / regions in which it operates.

◆Scale and intensity / salience of im- pact: In identifying its areas of most significant impact, the bank has considered the scale and intensity / salience of the (potential) social, economic and environmental impacts resulting from the bank's activities and provision of products and services. (your bank should have engaged with relevant stakeholders to help inform your analysis under elements c) and d))

Show that building on this analysis, the bank has

◆Identified and disclosed its areas of most significant (potential) positive and negative impact

◆SIdentified strategic business opportunities in relation to the increase of positive impacts / reduction of negative impacts

After the ACT-26 sustainability strategy was enacted, a series of analy-	AR 2021
ses were performed to gauge the impact of the LLB Group. This was	(P. 3)
done by using the Portfolio Impact Analysis Tool for Banks by the United
Nations Environment Programme Finance Initiative (UNEP FI), as well	TCFD
as tools of commercial providers.	(P. 24‒28)
The analyses took into consideration the market divisions and their
share of LLB Group income as at 31 December 2021.
1)  Private and Corporate Clients: about 33 %
2)  Private Banking: about 30 %
3)  Institutional Clients: about 37 %
Analysis of the data revealed that the key impact area for all market
divisions was climate action, i.e. SDG 13. They differed with respect to
the second impact area.
About 90 % of the Private and Corporate Clients portfolio consists of lo-
cal mortgage loans, for which reason the impact on SDG 11 - sustain-
able cities and communities - is especially significant here and there-
fore is planned to be taken into consideration in a targeted manner.
In Private and Institutional Banking, on the other hand, investment
business makes up the lion's share. In contrast to mortgage loans, the
impact here is not of a local but rather a global nature. The Key Sectors
Map generated by the UNEP FI Tools indicates that the greatest need
here relates to the areas health & safety and circularity. The latter in
particular offers synergy potential with climate action and biodiversi-
ty. The related SDGS are SDG 6, 8, 11, 12, 13, 14 and 15.
We actively seek a dialogue with stakeholders. The Group's responsi-
bility in connection with the sustainable conversion of society was dis-
cussed above all with clients and with the Principality of Liechtenstein
as majority shareholder, and synergies were identified.

Please provide your bank's conclusion / statement if it has fulfilled the requirements regarding Impact Analysis:

The impact analysis permits valuable conclusions to be drawn as to how the LLB Group can take responsibility and make a positive contribution to the sustainable development of society. The share of income from investment products considerably outweighs that from credit products at a ratio of two thirds to one third. However, because of the focus on mortgages, credit products have a very strong local impact in the Group's core markets. Active impact management is therefore essential.

Reporting / Self-Assessment Requirements	High-level summary of bank's response	References
2.2  Target Setting	Impact area climate action, i.e. SDG 13:	AR 2021
◆Show that the bank has set and pub-	As part of the new strategy, a clear timetable with medium- and long-	(P. 74)
lished a minimum of two Specific,	term climate targets was developed. Accordingly, the aim is to achieve
Measurable (can be qualitative or	full climate neutrality by 2040. By 2030, emissions are to be reduced by	TCFD 2021
quantitative), Achievable, Relevant	at least 55 % compared with 2019, and decarbonisation is to amount	(P. 13)
and Time-bound (SMART) targets,	to at least 30 % by 2026.
which address at least two of the iden-
tified «areas of most significant im-	With regard to the climate protection area, a distinction is made be-
pact», resulting from the bank's activi-	tween banking operations (Scope 1, 2 and 3.1 to 3.14 pursuant to defi-
ties and provision of products and ser-	nition of the Greenhouse Gas [GHG] Protocol) and banking products
vices.	and own investments (3.15).
◆Show that these targets are linked to
and drive alignment with and greater	Since 2021, banking operations have been run in a climate-neutral
contribution to appropriate Sustaina-	manner. Although substantial measures to reduce CO2 emissions
ble Development Goals, the goals of	have been implemented, the Group's climate balance has been pre-
the Paris Agreement, and other rele-	dominantly offset with CO2 certificates.
vant international, national or regional
frameworks. The bank should have	Other impact areas:
identified a baseline (assessed against	SMART targets for a second impact area still need to be set. This also
a particular year) and have set targets	requires an improvement in the quality of the available data, which
against this baseline.	currently permit quantitative tracking of progress in achieving targets
◆Show that the bank has analysed and	only for SDG 13.
acknowledged significant (potential)
negative impacts of the set targets on	Nevertheless, measures to increase the sustainability of our products
other dimensions of the SDG / climate	have been implemented across all SDG factors. This includes a conver-
change / society's goals and that it has	sion of all of our classic investment products to products with a mini-
set out relevant actions to mitigate	mum ESG performance. As a result, issuers with poor ESG ratings are
those as far as feasible to maximize the	no longer considered. In addition, companies that have committed se-
net positive impact of the set targets.	rious violations of important international norms or that generate a
	substantial portion of their turnover in controversial sectors, like to-
	bacco, gambling, nuclear energy or military weapons, are excluded
	from the portfolio.

Please provide your bank's conclusion / statement if it has fulfilled the requirements regarding Target Setting:

The LLB Group has set SMART targets for the impact area of climate protection that are in conformity with internationally recognised decarbonisation deadlines. Whereas other impact areas are already being taken into consideration through ratings and sector exclusions, the SMART targets for them still need to be developed.

2.3  Plans for Target Implementation and	A core element of the LLB Group's sustainability strategy is transpar-
Monitoring	ency. Therefore, the Group has undertaken to report annually in con-
◆Show that your bank has defined ac-	formity with the TCFD on targets achievement and climate opportuni-
tions and milestones to meet the set	ties and risks. The definitive target of climate neutrality by 2040 at the
targets.	latest is broken down into quantitative milestones by 2030 and 2026.
◆Show that your bank has put in place
the means to measure and monitor	In order to ensure that methods for measuring progress in achieving
progress against the set targets. Defi-	targets are also in line with the latest standards and the market, the
nitions of key performance indicators,	Group has moreover joined the PCAF and is continuously implement-
any changes in these definitions, and	ing their recommendations.
any rebasing of baselines should be
transparent.

Please provide your bank's conclusion/statement if it has fulfilled the requirements regarding Plans for Target Implementation and Monitoring:

The LLB Group has adopted an ambitious sustainability strategy, which the Group has been actively implementing since 2021. Full transparency is a key element of this strategy. In this regard, transparency is geared to the recommendations of state-of-the-art initiatives, such as TCFD and PCAF, in order to voluntarily inform stakeholders about the status of implementation.