SpareBank 1 : Group impact analysis

Summary of the group's impact analysis

2022

Contents
Introduction	3
Method and scope	3
What analyses were performed?	3
How were the analyses performed?	4
Corporates	4
Retail customers	5
EiendomsMegler 1 Midt-Norge	5
SpareBank 1 Regnskapshuset SMN	6
Summary	7
Our assessment of the group's positive impact	7
Our assessment of the group's negative impact	8

Introduction

The United Nations' climate initiative in the financial sphere (UNEP FI) is a global partnership established between the United Nations Environment Program (UNEP) and the financial sector. Among the UNEP FI's initiatives are six principles for responsible banking which were finally adopted in July 20191.

SpareBank 1 SMN signed the UN principles for responsible banking on 19 August 2019. The principles for responsible banking require banks to demonstrate transparency around the ways in which their products and services create value for their customers and investors, in addition to society as a whole. The principles are intended to guide banks' sustainability work, and to support society's overarching goals, in keeping with the UN's sustainable development goals and the Paris Agreement.

A central aspect of the framework for responsible banking is to conduct an impact analysis. SpareBank 1 SMN is a full-fledged finance centre in which traditional banking is complemented by the subsidiaries' customer offerings. Our knowledge and competence on the region, combined with local-level decision making, is among the group's foremost competitive advantages. The impact analysis encompasses the most important products and services offered by the finance centre to our most typical customer segments.

Method and scope

The impact analysis was prepared by the group's ESG Committee in collaboration with EY Norway with a focus on the personal market, corporate market, broker services and accounting services.

We employed the Portfolio Impact Analysis Tool for Banks2. This tool - developed by UNEP FI in conjunction with signatory banks to the principles for responsible banking - enables the estimation of potential impacts on a set of defined key values. Based on the NACE codes for corporate customers and product categories for retail customers, the UN has prepopulated sustainability indicators in the Norwegian context to show how the financing of various companies and purposes could impact the environment and social conditions. This is combined with the group's loan portfolios in our analysis.

An impact analysis does not necessarily describe the group's actual impact, but rather its potential impact, given present business volumes and scope of the business.

What analyses were performed?

We conducted a four-part analysis of the group's impact:

• UNEP FI Portfolio Impact Analysis
• Sector analyses
• Mapping of ESG risks and financed greenhouse gas emissions
• Simple impact analyses for SpareBank 1 SMN Regnskapshuset and EiendomsMegler 1 Midt-Norge

1. https://www.unepfi.org/news/industries/banking/principles-for-responsible-banking-released/
2. https://www.unepfi.org/positive-impact/unep-fi-impact-analysis-tools/portfolio-impact-tool/

How were the analyses performed?

• The portfolio analysis was performed with assistance from an analyst at the Data Warehouse and with a basis in UNEP FI Impact Analysis Tool v3. The tool is populated with the bank's and SpareBank 1 Finans' business data, which in combination with pre-completed data provides an estimate of the group's largest potential negative and positive impact areas.
• Sector analyses were done with a basis in the SASB's Materiality Finder3 and the
  MSCI's Materiality Map4
• The bank's exposure to financed greenhouse gas emissions and ESG risks was obtained from the group's PCAF and ICAAP reports
• The analysis for Regnskapshuset was done by identifying which sectors account for
  Regnskapshuset's largest revenues.
• The analysis for EiendomsMegler 1 Midt-Norge is based on the distribution of energy ratings for dwellings sold since the start of 2021.

Corporates

For corporate customers, the UNEP FI Portfolio Impact Analysis Tool points to indicators on which the bank's customers potentiallyhave a positive and/or negative impact.

The model is based on outstanding loans in the 50 largest sectors in SpareBank 1 SMN's portfolio of corporate customers. These sectors account for 95% of the bank's total loan portfolio. The figures in the graph are indexed such that 95% of the loan portfolio represents 100% in the graph.

Figure 1 shows the proportion of the bank's customers with a potentially positive and/or negative impact on one of the defined indicators in the model, given the current allocation of loanable funds.

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Figure 1: Proportion of corporate customers with a potential positive and/or negative impact on the tool's sustainability indicators

1. Find Industry Topics - SASB
2. ESG Industry Materiality Map - MSCI

Retail customers

For personal customers, the UNEP FI Portfolio Impact Analysis Tool points to areas on which the bank may potentially have an impact through its products.

The portfolio in the model is based on the bank's outstanding loans and/or number of customers in the following product categories: residential mortgages, saving accounts, current accounts, consumer loans, credit cards and car loans.

Figure 2 shows sustainability indicators on which the bank has a potential positive and/or negative impact in terms of how the loan portfolio breaks down on the defined product categories.

Figure 2: Proportion of retail customers with a potential impact on the tool's sustainability indicators

EiendomsMegler 1 Midt-Norge

Since the impact analysis in 2020 there has been little change in the share of energy-efficient dwellings sold through EiendomsMegler 1 Midt-Norge. It is worth noting that despite high proportions of dwellings with low energy ratings, the average energy rating is higher than the average for the country where 24% of dwellings have a G energy rating (18% in EM1) and 17% have an F rating (14% in EM1).

Energy rating	Number	Share
A	8	0 %
B	330	5%
C	626	9%
D	747	11%
E	725	10%
F	968	14%
G	1 299	18%
None	2 383	34%
Total	7 086

Table 1: Shares of dwellings sold, by energy rating