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
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 related 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 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 and will continue to monitor its exposure to adverse sustainability indicators and assess its 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 regarding 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 first reference period for quantitative reporting is 1 January to 31 December 2022.
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 aspiring to have a positive impact on the planet and on people, but also as a provider of financial services with 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.
At the Bank’s AGM earlier this year, the Bank outlined 3 key commitments as part of its ESG which included a Sustainable Finance lending target up to 2030 of EUR250m, a reduction of its operational emissions of 30% by 2030 and an evaluation in 2024 of reaching carbon neutrality by 2050.
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 comprise 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: 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 exluding 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, starting from 30 June 2023. Looking forward, as this information is published, it may be used by the Bank for its investment activities.
The Bank engages with fund providers and issuers of bonds and equities to gather information on their ESG activities.
References to international standards
The Bank’s evaluation of the business practices of investee companies is based on compliance with internationally recognized standards.
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APS Bank plc is regulated by the Malta Financial Services Authority as a Credit Institution under the Banking Act 1994 and to carry out Investment Services activities under the Investment Services Act 1994. The Bank is also registered as a Tied Insurance intermediary under the Insurance Distribution Act 2018. Terms and conditions apply and are available on request.