Strategic Shareholder Climate and Risk Financial Financial Barclays PLC 253 report information sustainability report Governance review review statements Annual Report 2022 ESG: Governance (continued) Managing impacts in lending and financing Appropriate management of environmental and social impacts helps to ensure the longevity of our business and our ability to serve our clients. At Barclays, we recognise the importance Enhanced Due Diligence Escalation and decision of risk identification and management in Our standards include an enhanced due Where client relationships or transactions the provision of financial services to our diligence approach for certain clients are assessed as higher-risk (high or customers and clients. operating in energy sub-sectors covered medium ESI risk rating) or outside appetite Our assessment of environmental and by our Climate Change Statement (in the case of Defence and Security) social risks informs our wholesale credit (thermal coal mining, coal-fired power following an enhanced due diligence risk management and helps safeguard our generation, mountain-top coal removal, oil review, they are then considered for reputation. This supports the longevity of sands, Arctic oil and gas projects and escalation to the appropriate business unit our business and also enhances our ability hydraulic fracturing ('fracking')) and clients review committee (e.g. Transaction to serve our clients and support them in in-scope of our Forestry and Agricultural Review Committee) or for clients in scope improving their own sustainability practices Commodities, World Heritage and Ramsar of our Climate Change standard, the and disclosures. Wetlands and Defence and Security Climate Transaction Review Committee standards where a similar approach is (CTRC) for consideration and a decision on Managing environmental and whether to proceed if transaction related. taken. social risks Business unit review committees comprise All in-scope clients in these sub-sectors Environmental and social risks are Business management and must be assessed annually via a detailed governed and managed through our representatives from the control due diligence questionnaire, which is used Enterprise Risk Management Framework functions, including Reputation risk, to evaluate their performance on a range (ERMF), setting our strategic approach for whereas the CTRC includes of environmental and social issues, and risk management by defining standards, representation from the Group Executive may be supplemented by a review of client objectives and responsibilities for all areas Committee. policies / procedures, further client of Barclays. The ERMF is complemented engagement and adverse media checks as Should the front office business team, the by a number of other frameworks, policies appropriate. This annual review either Sustainability and ESG team and / or and standards, all of which are aligned to Climate risk team believe the issues are generates an Environmental and Social individual Principal Risks. Impact (ESI) risk rating (low, medium, high), sufficiently material, these clients/ Our Climate Change Statement sets out or in the case of Defence and Security an relationships would be escalated to the our approach in relation to our climate assessment against risk appetite, which in Group Reputation Risk Committee for change ambition and to managing the turn determines whether further review more senior consideration and decision. impact of our climate-related activities, and client engagement may be required GRRC also includes representation from including setting restrictive policies in throughout the year. the Group Executive Committee. These respect of certain sensitive energy sub- Typically, high and certain medium ESI Committees may make the following sectors (thermal coal mining, coal-fired rated clients require further risk determinations: power generation, mountain-top coal assessment prior to execution of • approve the transaction or relationship removal, oil sands, Arctic oil and gas and transactions with those clients. hydraulic fracturing ('fracking'). • reject the transaction or relationship We undertook 869 reviews in 2022, being a We have also established positions on combination of annual due diligence • approve the transaction or relationship, Forestry and Agricultural Commodities, reviews and individual transaction reviews, subject to prescribed modifications World Heritage and Ramsar Wetlands and slightly fewer than the 903 we undertook in in the Defence and Security sector. • escalate the review of the transaction or 2021. The number of reviews for 2022 relationship to the Barclays Group CEO. In addition, we have developed internal reflects the maturity of the due diligence standards for each of these which reflects process and a reduction of out of scope Monitoring these positions in more detail. These referrals. As part of our management of standards, which sit under the environmental and social risks, we may management of Reputation risk in the require further client engagement in ERMF, determine our approach to climate relation to the specific environmental and change and relevant sensitive sectors and social risks that we have identified as part are considered as part of our existing of our enhanced due diligence process. We transaction origination, review and have used this engagement as an approval process. opportunity to gain a more detailed understanding of the risks and challenges that the client is facing and to better understand any climate transition plan that they may have.