SHANGHAI COMMERICAL & SAVINGS BANK | ALAWYS THINKING ABOUT YOU

Identification Process

Identification	Stakeholder identification	Conform to five aspects in the AA1000 SES (AA1000 Stakeholder Engagement Standard), dependency, responsibility, influence, diverse perspectives, and tension.	Defined 9 types of stakeholders
Identification	Confirmation of sustainability issues	Referred to international sustainability standards and regulations (including GRI Standards, SASB, SDGs, TCFD) and sustainability evaluations (DJSI, CDP, MSCI, Sustainable Finance Evaluation). Stakeholder communication, cases from other banks	A total of 21 sustainability issues are gathered.

Impact assessment	Double-materiality analysis	Invite 9 types of stakeholders to evaluate the level of impact of sustainability issues, and entrust the internal team to evaluate sustainability issues: Financial materiality: Level of impact on organizational value Impact materiality: Level of impact on economy, environment, and people (including their human rights)	13 internal surveys 649 external surveys
Impact assessment	Draw the double-materiality matrix diagram.	Arrange the order of material issues based on the analysis of double-materiality.

Confirmed materiality	Material issues	Identify annual material issues based on the level of impact and explain the impact of material issues.	A total of 12 material issues are available.

Review	Sustainable management	Materiality assessment results reported to the Board of Directors Materiality assessment results integrated into the SCSB’s ERM process Manage material issues and continue with tracking and evaluation. Be sure to respond to stakeholder concerns.

Results of Stakeholder Identification

Column - Establish a Stakeholder Communication Channel through ESG and Build the SCSB’s Sustainable Engagement Mechanism

To vigorously promote environmental, social, and corporate governance (ESG) development and achieve net-zero emissions by 2050, the SCSB formulated the “Regulations for Sustainable Development Engagement” in 2023 that apply to the SCSB and its subsidiaries (including overseas branches). Through communication, engagement, dialogue, interaction, and assistance with stakeholders including investee companies, financing service Customers and suppliers, the SCSB aims to leverage its financial influence to encourage stakeholders to realize sustainable development by taking concrete actions, thereby enhancing sustainability performance and value.

Engagement method: Include but are not limited to oral or written communication, contract formulation, setting conditions for credit business lending, and participating in shareholder or investor conferences with engagement targets.
Engagement principles: Comprehensive consideration should be given to interactions with the engagement target, its actions, and sustainability performance in environmental, social, and corporate governance, as well as the status of carbon emissions. Priority will be given to engagement targets with high climate risks, high carbon emissions, or material ESG topics.
Please refer to 2.1 Sustainable Finance for detailed engagement outcomes.

Stakeholder and Material Issues

Identification of Material Issues－Double-Materiality Analysis

The SCSB performs materiality analysis annually and incorporates the “Double-Materiality” Principle proposed by the EU for materiality analysis. Furthermore, the SCSB has complied with GRI 3: Material Topics 2021 to invite internal executives and senior management to evaluate the actual/potential positive/negative impacts of sustainability issues. Lastly, based on the level of stakeholder concern and the impact of sustainability issues, independent internal discussions were held for each sustainability issue to assess its “impact materiality” and “financial materiality”. If a sustainability issue is deemed material in either aspect, it is identified as a material issue.

In 2023, 12 material issues were identified, including “Information Security”, “Privacy Information Protection”, “Ethical Management”, “Corporate Governance”, “Climate Strategy and Management”, “Risk Management”, “Digital Finance and Service Innovation”, “Talent Attraction and Retention”, “Operating Performance”, “Compliance”, “Employee Training and Career Development”, and “Sustainable Finance”. Compared with 2022, two material issues including “Corporate Governance” and “Compliance” were added. “Customer Relationship Management” and “Occupational Health and Safety” were not included in the list of this year’s material issues.

Looking ahead, the SCSB will continue to communicate with stakeholders via diverse channels to gain a real-time understanding of material issues’ positive and negative impacts on the SCSB, as well as stakeholders' assessments of the effectiveness of the SCSB’s actions in response to such impacts.

Positive and Negative Impacts of Sustainable Issues

Upon further analysis of the positive and negative impacts of each sustainability topic and ranking them, the SCSB identified the top five positive and negative impact issues that were not marked as material issues in the matrix, so they were then included as material issues for the current year. After the positive/negative impact analysis and ranking, one additional material issue “Sustainable finance” was also included.

Description of Material Issues

Material issues	Corresponding topic and frame of the international standards	Description of the positive and negative impact	Activities involved with the impact Note:◎Activities causing the impact, contributing to the impact or directly related to the impact			Corresponding sections
Material issues		Description of the positive and negative impact	Upstream (e.g.Equipment and service supplier)	Organization operations (e.g.Personal banking and corporate banking service)	Downstream (e.g.corporate customer, individual customer)	Corresponding sections
Information security	GRI 418 Customer Privacy SASB FN-CB Data Security	If information system safety cannot be maintained, problems such as malfunctioning information equipment will occur. The SCSB adopted reinforced protection measures that adhere to international information security standards to bolster the stability and security of financial services development.		◎	◎	1.5 Information Security
Privacy information protection	GRI 418: Customer Privacy SASB FN-CB Data Security	The SCSB emphasized supplier/client privacy and data management to ensure that the data held is not exploited for unlawful purposes.		◎	◎	1.7 Privacy Information Protection
Ethical management	GRI 205: Anti-Corruption GRI 206: Anti-competitive Behavior SASB FN-CB Business Ethics	Ethical management is the bedrock of business operations, the SCSB stressed a corporate culture of ethical management and established and implemented policies to ensure ethical operations. Moreover, the SCSB also continued to maintain a high level of trust with stakeholders.		◎	◎	1.2 Ethical Management
Corporate governance	GRI 405: Diversity and Equal Opportunity	The SCSB strengthened the governance through system design and implementation. It also looked after the interests of other stakeholders to garner Customers’ support and trust.		◎		1.1 Corporate Governance
Climate strategy and management	Task Force on Climate-Related Financial Disclosures (TCFD) Suggestion	Climate change-related impacts can lead to enormous losses across the value chain. The SCSB continued to identify climate change-related risks and opportunities, and the Board of Directors was responsible for supervising the implementation of climate governance policies. At the same time, the aim was to bring climate topics to stakeholders’ attention.	◎	◎	◎	2.2 Climate and Nature-related Information
Risk management	SASB FN-CB: Systemic Risk Management	Various risks can lead to cost increases and losses for the SCSB. The SCSB formed a Risk Management Committee to formulate risk management policies in a bid to bolster the functionality of the SCSB’s Board of Directors and fortify its risk management mechanism.		◎		1.4 Risk Management 2.2 Climate and Nature-related Information
Digital finance and service innovation	Customized topic	Promoted fintech-related strategies and increased the quality requirement of digital systems to enhance the convenience, promptness, and customer experience of the SCSB’s financial services.		◎	◎	1.8 Digital Finance and Service Innovation
Talent attraction and retention	GRI 401: Employment	Provided good employee remuneration, welfare, and incentive systems, as well as measures for employee and family care, to enhance employee recognition.		◎		3.3 Employee Benefit and Welfare
Operating performance	GRI 201: Economic Performance	The SCSB is dedicated to business development, enhancing shareholder value through improved operational performance, and increasing transactions with upstream and downstream businesses.		◎	◎	Operating performance
Compliance	GRI 417: Marketing and Labeling	The SCSB believes that rigorous compliance with business-related regulations is essential for sustainable development. In addition, adhering to other environmental and socio-economic regulations further enhances the SCSB's compliance efforts beyond the scope required by the financial service industry.		◎		1.3 Compliance
Employee training and career development	GRI 404: Training and Education	Employee skills are closely related to corporate development, hence comprehensive career training helped to elevate employees’ soft and hard power. The SCSB provided talent with technical/professional training and comprehensive basic training, as well as assisted employees in career development.		◎		3.2 Employee Training and Career Development
Sustainable finance	SASB FN-CB Incorporation of Environmental, Social, and Governance Factors in Credit Analysis	Promoted ESG credit, ESG investment, and other financial services while incorporating ESG risks into credit and investment considerations. Enhanced the banking industry's sustainable contributions to the environment and society to minimize related impacts. It is hoped to encourage industries, investors, and consumers to prioritize sustainable development through financial markets.		◎	◎	2.1 Sustainable Finance

Management of Material Issues

Material issues	Potential Risk	Policy and Commitment	Action and Performance Review
Information security	Information security risks Equipment malfunction Operational disruption Compliance risks	Formulated information security policies and goals “Regulations Governing Information Security Incident” Regularly organized information security drills	Continued to obtain ISO 27001 Information Security Management System certification 4 sessions of information security-related courses were arranged for all employees 3 information security drills were carried out in 2023 (including social engineering drills, DDoS and ATM incidents)
Privacy information protection	AI fraud False information Personal data breach	“The SCSB Group Personal Data Protection Policy Stipulated “The Regulations for Reporting and Handling of Personal Information Security Incident”	Formed the personal data protection team Quarterly personal information security incident reporting and handling drills Enhanced access log management and updated user access permissions according to the principle of least privilege
Ethical management	Corruption risks Competition and monopoly practices Compliance risks	Formulated the ethical management policy in accordance with the law, including “Ethical Corporate Management Best-Practice Principles”, “Code of Ethical Conduct”, and “Procedures for Ethical Management and Guidelines for Conduct”, etc.	Formulated “Procedures for handling Whistleblowing ” and announced amended regulations to encourage employees to report specific illegal activities In 2023, 100% of the SCSB’s employees received anti-corruption education and training
Corporate governance	Compliance risks Conflict of interest	Formulated comprehensive corporate governance regulations such as “Rules of Procedure for Board of Directors Meetings Internal evaluations are conducted annually for the operations of the Board of Directors, functional committees, and the performance of board members	Enhance the corporate governance structure by establishing a Remuneration Committee, Audit Committee, Risk Management Committee, and Nominating Committee under the Board of Directors Completed the 2023 director performance self-assessment
Climate strategy and management	Climate risks Degradation of nature and biodiversity	Formulated the “Guidelines Governing Nature and Climate Risk Management” Signed the SBTi in 2023	Integrated climate risks into the group’s overall risk management framework Completed climate-related scenario analysis
Risk management	Operational risks Business risks	Stipulated risk management policies and further formulated risk policies based on business and operational characteristics, such as the “Credit Risk Management Policy”	All board members received 6 hours of risk education and training in 2023 Quarterly risk management reports were submitted to the Board of Directors
Digital finance and service innovation	Technology risks Customer attrition Aging population structure	The SCSB prioritized Customers’ needs and continued to apply big data analysis to understand demands, integrating innovative services to create a user-friendly and convenient digital lifestyle for Customers	In 2023, the Digital Banking Division was reorganized as the Digital Banking Department The number of active mobile banking users increased by 17.4% and digital account growth reached 50.2% in 2023
Talent attraction and retention	Flow of talent Low birth rate and labor shortage	Treated employees like family and strived to provide them with the best care and benefits, as well as allowed eligible employees to apply for parental leave Provided long-term incentive mechanisms	Caring tea parties were held for 165 new employees with less than a year of experience in 2023 Completed the employee satisfaction and commitment survey
Operating performance	Business risks Financial risks Geopolitics	Formulated the annual business plan and operational strategy Applied the strategic theme of “Multiple Cores and Digital Sustainability”	Approved by the FSC to open a new branch Continued to establish core systems
Compliance	Compliance risks Money laundering and terrorism financing Geopolitics	Stipulated the Group’s anti-money laundering policy “Guidelines Governing Risk Management and Supervision Framework of Compliance”	Established a dedicated “Anti-Money Laundering and Counter-Terrorism Financing Center” In 2023, 106 sessions of anti-money laundering and counter-terrorism financing-related education and training were conducted, amounting to roughly 16,496.7 hours
Employee training and career development	Training risks Delayed retirement	Formulated education and training management regulations, implemented the annual education and training plan, and conducted a performance review Formulated foreign language subsidy standards to provide fixed amount foreign language subsidies	Continued to organize high-level talent development programs, a total of 47 managers participated in the training program in 2023 81.54% of all employees passed the English proficiency test
Sustainable finance	Greenwashing risks Investment and financing risks Customer attrition	Joined the Equator Principles Association in October 2022 “Guidelines Governing SCSB’s Responsible Lending”, “Regulations Governing Responsible Investment” “Regulations for Sustainable Development Engagement”	In 2023, the SCSB signed two contracts under the Equator Principles There were 934 green credit cases In 2023, the sustainable investment web page was established, with 16 funds meeting the ESG fund requirements set by the FSC being listed

Sustainability Strategy Target Plan

Sustainable Development Strategies

To actively fulfill its corporate sustainability development in line with the international trend of balanced development in the environmental social and corporate governance (ESG), the SCSB has formulated the Sustainable Development Best Practice Principles and the Standard for Sustainable Development Promotion, which contain the mission and vision for sustainable development, sustainable development policy, sustainable development system as well as management policies, and implementation plan. The Sustainable Development Best Practice Principles and the Standard for Sustainability Development Promotion have been approved by the Board of Directors as the basis and guidelines for the fulfillment of sustainable development.

Sustainable Development Management

The SCSB’s Board of Directors is the supervisory and highest decision-making body for corporate sustainability-related topics. To systematically implement and promote corporate sustainability, the Head Office is in charge of planning sustainable development and compiling the sustainability report, as well as appointing appropriate personnel and formulating the “Regulations for the establishment of the Sustainable Development Committee”. Members include the President (also the convener), Executive Vice Presidents, and departmental heads at all levels. The committee is responsible for planning and reviewing the outcomes of sustainability strategies. Six functional teams including Responsible Finance, Environmental Sustainability, Social Charity, Customer Rights, Employee Care, and Corporate Governance were established. The subcommittees integrate resources from the SCSB Cultural & Educational Foundation and the SCSB Charity Foundation, ensuring that sustainability efforts are implemented effectively throughout the organization. They report to the Board of Directors every year on their operations and relevant agendas. In 2023, four Sustainability Development Committee meetings were convened to report the progress of the six functional teams, updates on climate risk projects, compilation of the sustainability report, discussions, and resolutions on ESG performance and evaluation,updates and amendments to sustainability policies, sustainable finance evaluation results, progress on green sustainable financing, and planning of renewable energy projects.