Social and environmental management

We actively manage 17 risk categories, and primary exposures to these risks resulting from lending and investment activities. These risks are managed actively by using SEMS and ensuring that the bank is aligned with industry best practice and the appropriate environmental, social, and human rights benchmarks. Nedbank has developed an independent social-and environmental risk assessment, with assessment criteria aligned to relevant Equator Principles (EP) and International Finance Corporation (IFC) Performance Standards. All client-facing credit risk reviews and new applications include the screening of high-risk clients and EP relevant deals through the SEMS process. Climate related risks are integrated into the existing SEMS process to ensure that they are assessed when granting credit.

All transactions in high-impact sectors, such as mining, construction, chemicals and oil, manufacturing, property development, agriculture, and waste management must receive social and environmental sign-off before the credit committee considers financing in line with the SEMS governance process, industry best practice and environmental, social, and human rights benchmarks. We continue with our partnership approach to all sensitive lending, working closely with our clients, surrounding communities, and relevant authorities to maximise benefits and minimise the negative impacts of these activities on the environment and society.

Nedbank has developed policies, procedures, workflows, and appropriate governance for lending activities across the bank which support the effective implementation of SEMS. Nedbank is also currently in the process of digitising the SEMS process across clusters to ensure effective social and environmental risk assessments are performed, and accurate storage of client data. The SEMS supports the operationalisation of the Nedbank Energy Policy and related glidepaths targets.

During 2024 the SEMS process was applied across various business units within our organisation. Due to political uncertainty surrounding the elections the number of new deal applications were lower resulting in a lower number of assessments. The most significant applications of SEMS were as follows: In our CIB division, all new applications, and credit-risk reviews for transactions in high-risk industries have been incorporated into the SEMS assessment process, which has been externally assured.

A total of 565 deals (excluding property finance) were assessed in CIB, compared with 579 in 2023. In Property Finance, 1 583 deals were assessed, compared with 1 805 in 2023.

A risk-based approach was adopted in Retail and Business Banking (RBB) due to the substantial number of clients. Clients are required to disclose any negative environmental or social impact their activities might have, and such disclosures are assessed through the SEMS process. If necessary, mitigating actions are taken. In our RBB Commercial Banking operations we have identified and defined environmental and social high impact industries. In 2024, 1 434 clients involved in these sectors were assessed, compared with 1 695 in 2023.

In the Nedbank Wealth business, most of our social- and environmental risk exposure result from clients’ acquisition of industrial and commercial properties that could present asbestos or land contamination concerns. The total number of clients assessed in 2024 was 144 compared with 161 in 2023.

We continued expanding the coverage of our SEMS process to our African regions during 2024.

Social and environmental policy

Our formal environmental policy confirms our group's commitment to an environmental protection and conservation culture in our operating environment and with all the parties with which we have a business association including, but not limited to, clients, suppliers, and contractors.

We therefore recognise environmental management as a critical area of corporate performance and accept that responsible business management is a crucial part of sustainable development.

The policy is aligned with the philosophy of conducting business in a responsible, fair, and honest manner and in keeping with government's efforts to protect the environment. The purpose of this policy document is to formalise environmental management in the group and to give guidelines for the introduction, development, maintenance and exercising of proactive environmental management processes and procedures. The guiding principles are that the group:

recognises the importance to be sensitive to the environment in its business operations;
will address risk areas and operational resource efficiencies related to its activities at facilities that it occupies;
realises its responsibilities for sensitive and protected areas, the national estate and world heritage sites where some of its facilities are found;
will address the environmental effect of its lending and financing activities in a responsible manner;
is committed to follow all environmental legislation and regulations applicable to its operations, as well as incorporating best practice, where proper;
supports the precautionary approach to environmental management that strives to expect and prevent potential environmental degradation;
recognises that environmental management must place people and their needs at the forefront of its concern, and serve their physical, psychological, developmental, cultural, and social interests equitably; and
recognises that, as a financial services institution, its most significant environmental risk may arise indirectly from the environmental impact of third parties such as its clients, investments, and business partners. Although we cannot prescribe environmental management policies to our clients, we will encourage sound environmental management and compliance with legislation and regulations.

Social and environmental policy

Managing social and environmental risk (SEMS)

In the past year, through our ESG and Climate Risk Management Frameworks, we have established a comprehensive process to identify and assess climate- and environmental-related risks and we integrate these risk considerations across our business.

This approach informs how we mitigate risks through our financing activities and pursue opportunities related to financing. Through client engagements, we have developed a greater understanding of the needs of our clients in adapting to and mitigating the impacts of climate change on their operations in a changing environment and society. During 2024 the mitigation of climate- and nature-related risks were enhanced through the strengthening and expansion of our Climate Risk Appetite Statement. The Climate Risk Appetite Statement outlines Nedbank’s principles for risk-taking in pursuit of our strategic objectives, taking into consideration our stakeholders and the bank’s commitment to mitigate risks related to climate change. Aligned to our focus on nature, Nedbank expanded the Climate Risk Appetite Statement to explicitly exclude the financing of any activities related to the protection of biodiversity resources or conversion or degradation of protected areas or critical habitat, regardless of technology or country or to any project or operations that may destroy or degrade protected and conservation areas. The statement was adopted by the board and aligns with Nedbank’s purpose and strategy. Our Climate Risk Appetite Statement and Energy Policy are subject to review every year.

Aligned to our focus on nature, Nedbank prohibits finance for any activities prohibited by national legislation or international conventions. This is in relation to the protection of biodiversity resources or conversion or degradation of protected areas or critical habitat regardless of technology or country or to any project or operation that may destroy or degrade South African protected and conservation areas listed in the South African Protected Areas Database and South African Conservation Areas Database.

Other exclusions from finance include socially and environmentally controversial industries such as:

Shale oil and gas;
Arctic oil;
Tar sands /oil sands;
Extra heavy oil;
deep water offshore well project or operations for oil or gas; and
Coalbed methane.

Nedbank’s key aims in managing social and environmental risk (including climate risk) include the following:

Reducing the social and environmental impacts of our own operations, also in the facilities we occupy.
Managing our indirect impacts through responsible lending by ensuring that the social and environmental risks of the projects and investments our clients undertake are adequately assessed and addressed.
Anticipating risk through developing scenarios, monitoring and managing the impact of climate risk on our operations, our business activities, the activities conducted by our clients and the communities in which we run, following our CRMF.
Ensuring alignment and mapping with the group’s strategic goals and supporting the business aims linked to the SDGs as set out in the Nedbank strategy.

Climate-related risks associated with the lending process involving funding for projects are managed through the Social and Environmental Management Systems (SEMS) process. We continually transform and mature our SEMS from learnings taken from regular interactions with the Taskforce on Nature related Disclosures, the African Natural Capital Alliance, peer learning sessions organised by the Embedding Project, and the United Nations Environment Programme Finance Initiative (UNEPFI)’s Africa and Middle East Regional Coordination Programme. The materiality of social and environmental issues was further guided by the various indices that Nedbank takes part in, such as the FTSE4GOOD, Dow Jones World Sustainability Index and Sustainalytics.

Group Social and Environmental Management System (SEMS)