Sustainability Journey

Sustainability Risks and Trends Management

Ziraat Bank assesses sustainability and climate-related risks as risk factors with the potential to generate financial impact across all key risk types, primarily credit risk, and integrates these risks into its corporate risk management framework.

Within this framework, Ziraat Bank classifies climate risks under the headings of physical risks and transition risks. The potential financial impacts of acute and chronic physical risks, as well as transition risks involving regulatory, technological, market, legal, and reputational factors, on credit risk, market risk, and balance sheet risks are assessed through scenario analyses and reflected in risk management processes. The analysis considers the effects of risks on the Bank's portfolio and value chain at the local, national, and global levels.

To measure climate risks, Ziraat Bank conducts sector-based climate risk heat map studies to determine the exposure of its credit portfolio to climate risks. Within the scope of these studies, the sensitivity of sectors to climate risks is evaluated based on national and international references, taking into account their weight in the Bank's portfolio, and the sectors with the highest financial impact in terms of climate risk are identified.

Based on the heat map results, Ziraat Bank applies scenario-based stress tests to measure the financial consequences of climate risks for the selected high-risk sectors: iron and steel, electricity generation, cement, aluminum, and the chemical (fertilizer). Scenario-based stress tests are conducted within the framework of transition risks, and the impact of physical risks is not measured at this stage. The analyses are conducted based on three different scenarios: Net Zero 2050, Delayed Transition, and Nationally Determined Contributions (NDC). Short, medium, and long-term impacts are evaluated, and the outputs are reflected in risk management processes.

The Bank manages its sustainability approach within the framework of its Sustainability Policy and the complementary Environmental and Social Impact Management Policy. In line with the general framework set out in its sustainability policy, Ziraat Bank continues its healthy growth as a competitive, strong, high market value bank integrated with the global financial system, guided by the principles of efficiency and responsible banking.

Within the scope of integrating climate risks into credit assessment processes, Ziraat Bank defines climate risk levels determined based on NACE classifications as financial risk parameters and continues its efforts to integrate these parameters into credit allocation and monitoring processes. This ensures that climate risks are assessed from a financial risk perspective in the Bank's decision-making processes.

Detailed information on the methodology, scenario assumptions, and financialization approaches related to the identification, measurement, monitoring, and reporting of climate-related financial risks is provided in the Risk Management section of the 2024 TSRS-Compliant Sustainability Report.