APS Bank plc (hereunder referred to as the “Bank”) and its subsidiaries acknowledge that non-financial factors – commonly referred to as Environmental, Social and Governance (ESG) factors – can have an important impact on people, businesses and communities. APS Bank plc is committed to contribute to sustainable investment through its presence in the financial services sector. As a leading community bank, APS Bank plc, has a prominent role to play and takes responsibility for its actions and engagements, as a member of society with its own impact on the planet and on people, but also as a provider of financial services with an indirect impact through the activities of its clients and investments.

APS Bank plc supports its customers goals to contribute positively to society through financial planning. This can be seen through its offering of investments products of an ethical nature, where those firms present in industries/sectors which threaten the community at large and score low in ESG factors are excluded. Reference can be made to the APS Ethical Fund and APS Personal and Occupational Pension Plans - Investment Strategies and a suite of ethically screened investments from different service providers.

This prominent position of APS Bank plc is also achieved by fully incorporating sustainability risk into the Group’s investment decisions. Different types of the Group’s investment decision making can lead to sustainability risk. Sustainability risk is a transversal risk of increasing importance. Failure to anticipate and manage this risk can have adverse consequences on the value of the investment. The Group’s sustainability risk management is aligned with the Group’s risk appetite and supports the Bank’s mission to bring sustainable solutions to its clients.

The Group adopted a Sustainability Risk Policy which builds on the Bank’s values (Excellence, Authenticity, Passion, Inclusiveness, Contemporary) and the Bank’s Business Plan and spells out the integration of sustainability risks in investment decision making. The Group integrates sustainability risks in investment decision making by taking stock of ESG factors (e.g. climate change, health protection, sustainability management by the board) and identifies sustainability risks emanating from ESG. Furthermore, the Group has policies in place to screen investments in sectors and industries which are involved in the production of controversial items.

The Bank as Advisor of financial products is to take into account the information which manufacturers of these products are required to disclose. This includes, how they integrate ESG risks into their investment decision making processes and the likely impacts on the financial products’ returns. The Bank’s Investment Distribution Unit is to engage with manufacturers of financial products to comprehend how they undertake the integration of the above. Furthermore, information provided by these manufacturers, as defined - environmental, social and employee matters, respect for human rights, anti-corruption matters, and anti-bribery, are to be integrated in the financial advice provided.

Remuneration Policy of APS Bank plc is also consistent with the Group’s aim to integrate sustainability risks. The Committee is tasked to assess the mechanisms and systems adopted to ensure that the remuneration system properly considers all types of risks.

Statement on principal adverse impacts of investment decisions on sustainability factors

Summary

This statement addresses requirements as set out in the Regulation (EU) 2019/2088 of the European Parliament and of the Council on sustainability‐related disclosures in the financial services sector (SFDR), specifically relating to Article 4 and accompanying Regulatory Technical Standards in relation to the consideration of principal adverse impacts of investment decisions on sustainability factors.

APS Bank plc, bearing LEI 213800A1O379I6DMCU10 (hereunder also referred to as “the Bank”) uses the definition of principal adverse sustainability impacts as described in Recital 20 of the SFDR being “those impacts of investment decisions and advice that result in negative effects on sustainability factors”, with sustainability factors referring to environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters as defined in Article 2 (24) of the SFDR.

The Bank considers principal adverse impacts of its investment decisions on sustainability factors. Additionally, it will continue to monitor its exposure to adverse sustainability indicators and assess its mitigation strategy in line with developments.  

Since standards regarding the consideration of sustainability criteria are still emerging and reporting frameworks have not yet come into force, data is currently not always available, especially with regards to the adverse impacts on sustainability factors.

APS Bank is required to collect data on principle adverse impacts on sustainable factors and prepare an annual quantitative and qualitative report on them. The second reference period for quantitative reporting is 1 January to 31 December 2023.

Description of the principal adverse impacts of investment decisions on sustainability factors

The Bank has an established record in Malta as a Bank with sustainability at the heart of its strategy.

The Bank takes responsibility for its actions vis-à-vis environmental and social issues. As an active member of society, it aspires to have a positive impact on the planet and on people. Also, as a provider of financial services, it makes an indirect impact through the activities of its investment services.

This prominent position locally on ESG is achieved and managed on a continual evolving basis through a holistic strategy which seeks to integrate ESG into the Bank’s culture, lending and investment decisions, and by bolstering the Bank’s sustainability risk management.

APS Bank has appointed a third party to assist in stock-take and calculations of Scope 3 Category 15 emissions. Any qualifying assets/investments managed by REAPS, the Bank’s investment management subsidiary will be included in these calculations.

Once this exercise is concluded, in conjunction with the third-party consultant, the Bank will then proceed to review potential pathways to carbon neutrality by 2050.  This forms the second phase of our exercise.

We anticipate the second phase to form the basis for our preliminary feasibility study, as outlined in our commitment 3 set out in the Bank’s AGM of May 2023.

The Bank notes the European Green Deal of 2019 and the subsequent work by the European Commission developing a comprehensive policy agenda on sustainable finance. This led to several new regulatory requirements applicable to the European financial system, one of which is the SFDR. 

Description of policies to identify and prioritise principal adverse impacts on sustainability factors

The Bank’s investment management decisions and distribution of investment products to clients can result in negative effects on environmental, social and employee matters, respect for human rights, anti‐corruption and anti‐bribery matters. As a result, the Bank’s Investment Distribution Unit adopted a “Principal Adverse Impact” (“PAI”) Integration Framework to assess its principal adverse impact (as defined above). The PAI Integration Framework comprises the availability of ESG data and ESG Rating Scores for investment managers and advisors. The integration of PAI safeguards include breaches screening and a common exclusion list. The PAI Integration Framework is summarised as follows:

• Exclusion list: to ensure that the Bank follows all applicable laws, regulations, and economic sanctions, the Bank applies tailored ESG negative screening in investment decision making and advice.
• On-going Screening: the Bank’s investment management decisions and advice in financial instruments could be subject to on-going screening, which identifies issuers/manufacturers that are allegedly involved in breaches of international law and norms on environmental protection, human rights, labour standards and anti-corruption. The extent of on-going screening may vary from mandate to mandate.
• ESG Scoring: in selecting financial instruments, reference may be  made to an ESG Rating Score depending on the tailored approach to excluding investments from the applicable universe.
• PAI Indicators: the SFDR mandates financial market participants to disclose indicators related to principal adverse impacts of their investment decisions on sustainability factors.  This information  may be used by the Bank for its investment activities.

Engagement policies

The Investment Distribution Unit of the Bank interacts with financial market participants to gather information on their ESG activities and understand the product and strategy. Regular meetings are held with providers, their fund managers, investment specialists as well as their ESG team, both virtually and on premises, whereby ESG matters are discussed in depth. The Bank generally enquires about what ESG practices they implement and how it impacts their strategies. The Bank also enquires about future plans that they have regarding SFDR Article 8 and 9 funds.

In addition, further information is sourced from the providers’ websites.

References to international standards

The Bank’s evaluation of the business practices of investee companies is undertaken by using a recognised rating agency.