Information unaudited Information ungeprüftClimate change mitigation

As a company committed to corporate social responsibility, it is important to us to monitor negative impacts on the climate and counteract them as effectively as possible. We meet this commitment by managing our greenhouse gas emissions both in our own operations and in our banking products.

The LLB Group seeks to contribute to the solution for a sustainable future. That is why we have developed an ambitious climate strategy. To shape the successful transformation of the LLB Group, we are moving towards climate-conscious banking operations and customised banking products. Our greatest impact on the climate comes from our banking products and services, which generate significantly higher greenhouse gas (GHG) emissions than our own banking operations. Nevertheless, we also see it as our duty to monitor and reduce our GHG footprint in banking operations.

General information

Our key internal and external stakeholder groups have assessed the topics of ʼclimate change mitigationʼ and ʼclimate change adaptationʼ as material, based on a range of impacts, risks and opportunities. These differ depending on their position in the LLB Groupʼs value chain:

• We make a positive impact by providing funding to climate-friendly companies and projects. Therefore, some LLB funds invest in financial instruments with the most positive impact possible on the climate (e.g. green bonds). The extent of short-term positive effects, as well as the medium- to long-term likelihood of positive outcomes, depends on the willingness of clients to invest in sustainable and responsible investments.
• Negative impacts on the climate result from our own GHG emissions or those caused by the actions of our counterparties. In addition to banking operations, our loan portfolio and our investments in investment counselling are the main drivers of our GHG emissions. The negative consequences of climate change affect people as well as the environment. We estimate the likelihood of such effects occurring in the medium to long term to be significant.
• We see significant risks particularly in our loans: on the one hand, climate change is contributing to more extreme weather events and natural disasters, which increases the risk of value loss in physical assets and results in higher insurance costs. On the other hand, the transformation towards low-carbon economies carries the risk of turning fossil fuels into stranded assets, which could impact investments and endanger the economic stability of companies in this sector. In our banking operations, a risk arises if we fail to implement the necessary measures to adapt to climate change. There are currently no negative financial effects arising from the risks described.
• We see an opportunity for proactive action to reduce negative impacts and for the potential occurrence of positive effects through the provision of financial resources to be accompanied by a reputational gain for the LLB Group. We cannot currently quantify the positive financial effects.

The ESRS subtopic ʼEnergyʼ was assessed by our internal and external stakeholders as immaterial due to our business model and value chain. Like other banks, we mainly operate office premises that are less energy-intensive than, for example, the production sites of manufacturing companies. Therefore, no significant impacts, risks or opportunities could be identified with regard to the energy factor. Nevertheless, energy plays an important role in achieving our GHG reduction targets in banking operations.

We have not identified any significant impacts, risks or opportunities with regard to our own investments. However, since they also contribute to the increase in our GHG emissions, we have extended our GHG reduction target to this area in the spirit of a holistic climate strategy. We therefore voluntarily report on our efforts in this regard in own investments.

Transition plan for climate change mitigation

Our transition plan addresses the key impacts, risks and opportunities related to climate change mitigation and adaptation. Its aim is to minimise negative impacts on the climate and climate-related risks by reducing our GHG emissions. The transition plan is closely linked to our ACT-26 corporate strategy. As part of this, the LLB Group has set itself the goal of achieving absolute net-zero greenhouse gas by 2040 – ten years earlier than agreed in the Paris Climate Agreement (see the Sustainability in the business model and strategy section). This requirement applies to all LLB Group locations as well as to our products and services (loans, LLBʼs own funds, asset management mandates).

The GHG reduction shall be implemented in stages; 2019 serves as the base year for all measures:

• By 2026, GHG emissions from own investments and banking products shall be reduced by at least 30 per cent.
• In banking operations, this reduction shall represent at least 20 per cent by 2026.
• By 2030, we aim to reduce our GHG emissions by 55 per cent across the Group. This figure includes banking operations, our own investments and our banking products.

The base year was chosen as this was the last full year before the COVID-19 pandemic and it is therefore the most representative year for our strategy period. The years 2020 and 2021, which were marked by lockdowns, would provide a highly distorted picture as a basis for comparison.

The Group Executive Board and the Group Board of Directors are responsible for monitoring the defined GHG reduction targets. Due to their membership in the Sustainability Council, members of the Group Executive Board are regularly informed about operational and financed GHG emissions as well as mitigation measures (e.g. transport and lending policies). At the same time, operational GHG emissions are included in the quarterly strategy update to the Board of Directors. The Risk Report to the Group Board of Directors provides information on financed GHG emissions for own investments and mortgages. Any adaptation measures to the climate strategy are proposed by the Group Executive Board and decided upon by the Group Board of Directors (see section on Sustainability governance).

The costs of reducing our GHG emissions represent less than 5 per cent of our operating expenses and are therefore considered immaterial. As a financial company, we do not calculate CapEx and OpEx metrics; therefore, we use operating expenses as the basis for the relevant assessment.

Target definition

Our targets are science based and consistent with limiting global warming to 1.5°C. We are committed to achieving net-zero emissions by 2040, which has been identified in the guidelines of the Intergovernmental Panel on Climate Change (IPCC) as the critical tipping point for achieving the 1.5 degree target. The IPCC scenarios clearly show that an early and sustained reduction of greenhouse gases is crucial to avoid excess emissions. A net zero in 2040 therefore has a significantly higher probability of limiting global warming to 1.5°C than a net zero in 2050.

Furthermore, we are guided by the EU climate targets, in particular the European Green Deal, which calls for a reduction in GHG emissions of at least 55 per cent by 2030. We also support Liechtensteinʼs national climate goals. As a member of the Net-Zero Banking Alliance, we are committed to setting our net-zero targets according to their standards and requirements. We have not derived our targets from a sector-specific decarbonisation pathway for companies we finance or invest in. We are also not pursuing a sector-specific emission reduction pathway with regard to our mortgage portfolio.

As part of our net-zero target, we aim for the most complete reduction possible of our GHG emissions. However, we assume that a 100 per cent reduction in emissions by 2040 is unachievable. In line with the ESRS definition, we therefore intend to reduce our emissions by 90 to 95 per cent (see section Offsetting of remaining greenhouse gas emissions).

Our overarching absolute GHG reduction target – that is, net-zero emissions by 2040 – refers to the following scopes defined in the Greenhouse Gas Protocol (GHG Protocol):

• Scope 1: includes all emissions caused directly by combustion (e.g. company vehicles).
• Scope 2: includes emissions caused by purchased energy (e.g. electricity, heating).
• Scope 3.1-3.7; 3.15: includes emissions caused by purchased goods and services, third-party services or own products and services.

Scope 3 categories (3.1 to 3.7 and 3.15) that are relevant for the LLB Group are: purchased goods and services; capital goods; fuel and energy-related activities; upstream transportation and distribution; waste generated in operations; business travel; employee commuting and investments.

We consider scope categories 3.8 to 3.14 to be immaterial for the following reasons:

• Upstream leased assets (Scope 3.8): emissions from leased fixed assets, plant and equipment, such as office buildings, are already included in the LLB Groupʼs Scope 1 and Scope 2 emissions. Therefore, emissions from energy consumption and those directly generated by these buildings are already recorded.
• Downstream transportation and distribution (Scope 3.9): as a bank, the LLB Group neither produces nor sells physical products. Therefore, there are no relevant transport or distribution processes that could cause emissions.
• Processing of sold products (Scope 3.10): since the LLB Group does not manufacture physical products, there is no downstream processing by third parties that could cause emissions.
• Use of sold products (Scope 3.11): the LLB Group does not produce any physical products that could be used. Therefore, no emissions are generated by the use of such products.
• End-of-life treatment of sold products (Scope 3.12): since the LLB Group does not manufacture physical products, there are no products that need to be disposed of or treated at the end of their useful life. Therefore, this scope does not apply.
• Downstream leased assets (Scope 3.13): the leasing of property, plant and equipment does not form part of the core business of the LLB Group. There are therefore no relevant emissions or leasing processes that would have to be taken into account.
• Franchises (Scope 3.14): the LLB Group does not operate any franchise companies. There are therefore no relevant emissions that would have to be taken into account.

Scope 3.15 (Investments) is of particular importance for banks. For the LLB Group, this concerns those emissions caused by the bankʼs own investments and banking products (loans, LLBʼs own funds, asset management mandates). The interim target for the companyʼs own business operations relates to Scopes 1, 2 and 3.1 to 3.7. The companyʼs interim target for own investments and banking products relates to Scope 3.15.

LLB Group decarbonisation levers

Decarbonisation levers and locked-in emissions

The relevant decarbonisation levers and their expected contribution to the implementation of our GHG reduction targets can be found in the table above. The introduction of new technologies to achieve these goals is of little importance to us as a financial company. More important are adjustments to our product and service range. We did not consider any climate scenarios when determining our decarbonisation levers.

We recognise the risk of locked-in GHG emissions particularly in the mortgage portfolio. GHG-intensive real estate projects can have a long-term impact on our GHG inventory, as withdrawal from these assets is legally only possible to a limited extent. For this reason, we have adopted a policy for the lending activities in the reporting year aimed at reducing stranded assets¹ (see the section on Loans).

Climate risks

We are making use of the transition periods for ESRS E1-9 and ESRS 2 SMB-3. As such, we are not disclosing information regarding expected financial impacts from material physical and transition risks, nor are we disclosing potential climate-related opportunities. As part of an ongoing project to integrate ESG risks into the risk management process, we are ensuring that such risks are systematically identified, assessed, managed and monitored in the future in order to sustainably strengthen the resilience of the LLB Group while simultaneously meeting all relevant regulatory requirements. The Group Financial Risk Controlling department is responsible for implementing the project.

Resilience of the business model

To test the resilience of our business model against climate risks, we conducted a climate scenario analysis for our investment portfolio (LLBʼs own funds, asset management mandates, own investments) in 2024 using MSCIʼs Climate Value-at-Risk (CVaR) model. The analysis is based on two 1.5-degree scenarios from the Network for Greening the Financial System (NGFS), which depict the transition to a sustainable economic model by 2050: one in a disorderly manner, one in an orderly manner. In a disorderly scenario, the transition is delayed and abrupt (for example, through emergency intervention by states), whereas an orderly transition is timely, predictable and gradual.

Transitional climate scenarios for the calculation of CVaR

As a result, in the disorderly scenario, a decline in assets of 12.1 per cent is to be expected in the portfolio by 2050; in the orderly scenario, this value is only slightly lower at 11.5 per cent. This was to be expected, as an orderly transition allows market actors to adjust to the tremendous changes over a longer period of time. The figures indicate a relatively high vulnerability of the investment portfolio to climate-related transition risks. However, the models used do not allow any conclusions to be drawn about climate-related physical risks. To determine this, scenarios with higher temperatures would be necessary, which we cannot currently model.

We consider the results to be an important first rough assessment and are working hard to extend the analysis to other areas (in particular loans and climate-related physical risks). We can only align our GHG reduction targets with the results of the resilience analysis once this process has been completed.

1According to the “FMA Guide for Managing Sustainability Risks” by the Austrian Financial Market Authority, stranded assets are assets whose “earning capacity or market value of which falls in an unexpectedly drastic way, in extreme cases until worthless. Examples include power stations that may no longer be operated due to changes in regulatory conditions e.g. energy efficiency criteria, or oil or gas fields, that are no longer profitable or permissible to open up or operate.” (Document No. 01/2020, p. 14, footnote 37).

In order to adapt our business model to climate change in the short, medium and long term, we have expanded our responsible product range in recent years (in particular LLBʼs own funds and asset management mandates) and, with regard to our own investments, we have decided to almost completely withdraw from companies in the fossil fuel sector. However, our ability to adapt is fundamentally dependent on the progress of the transformation toward a sustainable and resource-efficient economy. Only if we find sufficient investment opportunities on the asset side that align with the global 1.5-degree target can we successfully complete the transformation of our portfolios. We closely monitor global political, economic and regulatory developments as they have a major impact on the value of our investment portfolio.

Compliance with other EU legal acts

Our transition plan is not yet linked to the performance indicators of the EU Taxonomy for sustainable activities. In general, we assume that high taxonomy scores are linked to a positive contribution to macroeconomic transformation and enhanced corporate resilience. In the future and in line with current discussions on the fundamental development of the EU Taxonomy, we will examine how we can incorporate it into our sustainability strategy.

As a financial company, the LLB Group does not carry out any economic activities that make a significant contribution to the environmental objectives of “climate change adaptation” or “climate change mitigation” in accordance with the Taxonomy Regulation. However, we finance or invest in counterparties whose economic activities fall within the scope of the EU Taxonomy. The share of on-balance sheet assets related to environmentally sustainable (i.e. taxonomy-aligned) economic activities is expressed in the Green Asset Ratio (GAR); further performance indicators are defined for off-balance sheet assets (see chapter on EU Taxonomy).

The LLB Group is not exempt from the EU Paris-aligned benchmarks according to Delegated Regulation (EU) 2020/1818.²

Impact on employees

Our transition plan has a noticeable impact on our employees. As part of our mobility management, we offer financial incentives for the use of public transport and therefore promote environmentally friendly travel for employees. On the other hand, employees may suffer financial disadvantages if they are dependent on a car with a combustion engine (see section on Corporate mobility management). When adopting such measures, we always pay attention to the consequences for our employees and carefully weigh up the positive and negative effects.

At the same time, the transition to a climate-neutral economy opens up new opportunities for our employees. We offer a range of training programmes that give our employees the opportunity to develop new skills in sustainable financial products and services. Furthermore, additional jobs will be created in the area of sustainable investment and green financial products. This strengthens our companyʼs position as an attractive employer. All of these measures not only contribute to reducing environmental impacts, but also support the long-term success and innovative strength of the LLB Group.

2According to the ESRS, companies are exempted from the EU Paris-aligned benchmarks if they (1) derive 1 per cent or more of their revenues from exploration, mining, extraction, distribution or refining of hard coal and lignite; (2) derive 10 per cent or more of their revenues from exploration, extraction, distribution or refining of oil fuels; (3) derive 50 per cent or more of their revenues from exploration, extraction, manufacturing or distribution of gaseous fuels; (4) derive 50 per cent or more of their revenues from electricity generation with a GHG intensity of more than 100 g CO_2e/KWh, or (5) negatively impact one or more of the EU environmental objectives under the Taxonomy Regulation.

Strategies for dealing with climate change

ACT-26 and the Transition Plan provide the framework for managing impacts, risks and opportunities related to climate change. There are also specific strategies for banking operations, own investment and various types of banking products, which we will present separately below.

Banking operations

As with other financial institutions, the impact of our banking operations on the climate is relatively small. This is demonstrated by the comparison of our own GHG emissions (Scopes 1, 2 and 3.1 to 3.7) and our financed emissions (Scope 3.15); further information can be found in the Greenhouse gas emissions section. Nevertheless, we want to reduce our emissions in banking operations and exercise our responsibility.

For our climate-focused activities in banking operations, we measure and manage Scopes 1, 2 and 3.1 to 3.7 in all regions in which we operate, based on the definitions of the GHG Protocol. The most important lever for reducing our GHG emissions is the mobility of our employees. Commuting and business travel together account for the majority of our operational GHG emissions. Energy management as defined under Scope 1 and 2 represents the second largest lever in banking operations and therefore also plays a key role in our GHG targets. We do not apply an internal CO₂ pricing system.

Corporate mobility management

The key points for this area are defined in the “Mobilitätsmanagement der Liechtensteinischen Landesbank AG inklusive FL-Gruppengesellschaften” (“Mobility management of Liechtensteinische Landesbank AG including FL Group companies” policy), which was adopted by the Group Executive Board. The aim is to promote green mobility when commuting to and from our locations in Liechtenstein. The Logistics Services organisational unit is responsible for the operational implementation.

“Mobility Management 2.0” has been in force since the beginning of 2024, creating further incentives for climate-friendly mobility. At our locations in Liechtenstein, we have significantly increased our subsidies for using public transport and the bonuses that we pay employees who choose not to take up a parking space. By contrast, we apply a two-tier system of parking charges, which depend on the length of an employeeʼs commute. Discounts are available for electric vehicles and plug-in hybrid vehicles.

In addition, we have taken measures with regard to business trips by making changes to our expense regulations. For instance, staff travelling to social events and internal meetings are expected to use mainly public transport. GHG emissions from LLB Österreich commuter traffic are much lower than at our other locations due to the particularly well-developed Wiener Linien network. The bank has covered the cost of annual season tickets for public transport since September 2023 in order to make using it an even more attractive proposition. LLB Schweiz is currently weighing up changes to its own mobility management.

Energy supply

In order to control our GHG emissions in banking operations, we primarily rely on purchasing electricity from renewable energies (e.g. wind, solar, hydropower). In Liechtenstein, Switzerland and Austria, we have already switched to 100 per cent green electricity. We have also installed solar panel systems at various locations. Since July 2022, all LLB Group buildings that previously used natural gas have been running entirely on biogas.

The Logistics Services organisational unit continues to identify potential energy savings and evaluates the outcome of efficiency measures. The requirements of the climate strategy are directly applicable to our energy management and are not operationalised within the framework of a separate policy.

Supply chain management

The development, manufacture and delivery of items and materials (e.g. technical equipment, furniture, office supplies) that we need for our banking activities also cause GHG emissions. For this reason, we have adopted a Code of Conduct for strategic suppliers, which must be signed by all suppliers above a certain purchasing volume. The suppliers of the LLB Group undertake to comply with the principles of the Code. These include the fight against corruption and money laundering, the protection of human rights, environmental and climate change mitigation measures as well as data protection.

During the reporting year, we presented the Supplier Code of Conduct to existing and strategic suppliers, who subsequently signed it. We have contacted suppliers with an annual turnover of over CHF 1 million; they have also signed the Supplier Code of Conduct. New suppliers must sign the Supplier Code of Conduct before entering into business relations. Test steps are not yet implemented.

In addition, we have stated in the Group directive “Einkaufs-Management – Group Sourcing & Procurement” (Group directive on “Purchasing Management – Group Sourcing & Procurement”) that the sustainability effect of a product must be taken into account in the procurement process. The Group Sourcing & Procurement organisational unit is responsible for supplier management.

Climate change adaptation

We consider the adaptation of our banking operations, which has become necessary due to climate change, to be one of the key challenges for the coming years. To date, we have not adopted a strategy or policy on this matter.

Own investments

We believe that our own investments are an important tool for reducing negative impacts on the climate and society. In contrast to many banking products, we have sole decision-making responsibility in this respect: we determine the companies, projects and financial instruments that we invest in. This gives us significant leverage to reduce our financed GHG emissions.

In order to fulfil our ecological and social responsibilities, we have defined a series of criteria for the areas of environment, social issues and governance for our own investments, which we take into account when making investment decisions. These include violations of international and national standards, the manufacture of controversial products and serious controversies involving companies.

Management tools³ and ESG criteria for own investment

Particularly relevant for climate change mitigation is the exclusion of companies that generate more than 10 per cent of their turnover from coal in thermal use or from shale oil or gas. In 2023, we decided to withdraw from fossil fuels as much as possible. This means that for our own investments, we do not make any direct investments in companies in the fossil fuel sector. The exclusion is based on the NACE codes of our counterparties. We cannot completely rule out indirect investments via collective investments; however, these are immaterial positions (31.12.2024: significantly under 1 % of the total portfolio).

3The typology associated with ESG management tools is based on the ʼFMA Guide for Managing Sustainability Risksʼ from the Austrian Financial Market Authority (FMA, document no. 01/2020, p. 42 et seq.) as well as Fact Sheet 2021/1 on Dealing with ESG Risks from the Liechtenstein FMA (p. 15 et seq.). Negative selection refers to a tax instrument whereby financial instruments are excluded on account of their assignment to a problematic sector or a problematic business activity. Divestment is also based on broad exclusions of sectors or business activities, but it targets financial instruments that have already been invested in (as opposed to negative screening, which is applied to new business). Conversely, positive selection means targeted investment in sectors or business activities that are classed as positive in terms of sustainability. ESG integration means taking direct account of ESG factors when making decisions. In terms of engagement, a good example would be an investor attempting to influence a company by exercising their voting rights. The aim is to steer the company in a direction that is seen as sustainable.

The sustainability criteria that apply to our own investments were decided on by the Group Asset & Liability Committee (GALCO) and comply with the Group regulation “Marktrisikomanagement” (Group regulation on “Market risk management”). The criteria are continually reviewed and updated. The Group Treasury organisational unit is responsible for the operational implementation.

We also pursue our sustainability goals in our own investments through the active exercise of our shareholderʼs rights and participation rights. Similar to the approach we take for our investment products (see section on Asset management and own funds), we apply the assessment methodology for Socially Responsible Investors (SRI) of International Shareholder Services (ISS) to exercise our voting rights on shares. We are therefore also following the guidelines on the UN Principles for Responsible Investment (UN PRI).

Asset management and own funds

In asset management and our LLB funds, we pursue a responsible approach that takes ethical, social and environmental aspects into account. Unlike with our own investments, our decision-making freedom in asset management is limited, as we always take the sustainability preferences of our clients into account. Therefore, our options for reducing GHG emissions through our investments are limited.

We have opted to apply a methodologically comprehensive approach to the investment process. Similar ESG criteria are applied to the selection of individual securities as for own investments (see section on Own investments). Suitable instruments to reduce our GHG footprint include the exclusion of or withdrawal from investments in coal and shale oil or gas, as well as targeted investments in climate-friendly companies or projects (green investments).

Management tools and ESG criteria for asset management

We pay particular attention to EU Sustainable Finance Disclosure Regulation (SFDR) classifications when selecting funds for our investment products. For this reason, our investment counselling, the LLB range of funds and our third-party fund recommendations all contain a high proportion of investment funds that promote social and ecological criteria (“light green” financial products according to Art. 8 SFDR) or invest significantly in sustainable companies and projects (“dark green” financial products according to Art. 9 SFDR).

Voting and engagement are also suitable for pursuing our sustainability goals in the asset management of our own funds. With the support of the Institutional Shareholder Services (ISS), we have clearly positioned ourselves in equity funds. For voting analysis and decisions, we use the SRI assessment methodology from the ISS. In asset management and with our funds, we also follow the recommendations of the UN Principles for Responsible Investment.

In line with the requirements of the SFDR, we regularly screen our investments for indicators of adverse sustainability impacts (Principal Adverse Impact Indicators, PAI). This also includes for GHG emissions caused by our investments. By doing so, we continue to have a precise overview of the impact of our investment decisions and fulfil our due diligence obligations in the area of sustainability.

The details on our approach to responsible investment are included in the Group directive on investment counselling and asset management. In addition, this information can be found in every investment proposal or asset management agreement. The responsible investment approach outlines the specific ESG management tools for the respective mandate; LLB Asset Management is responsible for this.

Investment counselling and private label funds

The majority of our managed assets consist of assets in which our clients have invested as part of investment advisory mandates. In contrast to our fund products and asset management mandates, the investment decision here rests solely with our clients, which is why our scope for action is correspondingly limited. Nevertheless, we continue to fulfil our responsibility by offering investment counselling mandates with varying levels of focus on sustainability. However, in line with common industry practice, these are not part of our net-zero target.

Our influence on private label funds is even smaller. These are purely execution transactions that we carry out on behalf of external asset managers. The decision regarding investment policy is made by our clients, who act on behalf of their customers. We recognise that we also have an impact on the environment and society through these services. However, because we do not participate in investment decisions, we have excluded private label funds from our general objectives and have not defined a strategy for GHG reduction.

Loans

In the area of loans, we focus on real estate and mortgages. In Liechtenstein, we have a leadership position in the mortgage lending business with a market share of around 50 per cent. Mortgages also play a decisive role in LLB Schweiz. With tailored financing products and services, we specifically support sustainable construction and energy-efficient renovations.

In order to reduce our GHG emissions from loans, we adopted a new policy during the reporting year. Its focus is on mortgage financing, which accounts for around 90 per cent of our loan portfolio. This makes them the most effective lever for controlling our financed emissions when it comes to lending. Three fields of action are crucial for achieving the ACT-26 goals:

• Improving the data basis: we want to close existing data gaps, replace estimates with actual values, thereby optimising the data quality for the GHG calculation.
• Reduction of stranded assets⁴ in the portfolio: various measures and initiatives aim to convince our clients of the potential of energy-efficient renovations, thereby reducing the greenhouse gas emissions of our loan portfolio. Against this background, we have trained our consultants on the topics of sustainable construction and energy-efficient renovations, revised our product portfolio and launched a new CO₂ and renovation calculator.
• Avoiding stranded assets in new business: we also want to avoid GHG-intensive real estate projects in new business wherever possible. In particular, the training courses for consultants mentioned above help us to identify critical assets in a timely manner and motivate clients to implement GHG-reducing measures.

All of these fields of action are particularly relevant for our target markets of Liechtenstein and Switzerland. In addition, the loan policy also defines a field of action for Lombard loans. This is in response to the guidelines from the European Banking Authority (EBA) for implementing sustainability in the lending process, as well as the requirement from the Austrian Financial Market Authority to take initial measures in the Lombard loan sector. Lombard loans are excluded from the calculation of financed emissions.

The Group regulation “Kreditrisikomanagement” (Group regulation on “Credit Risk Management”) stipulates that we must exclude business relationships that contravene laws, are in breach of moral or ethical principles, may harm the reputation of the LLB Group or can be used to circumvent the law. The Group Risk Management organisational unit is responsible for the content.

4In this context, we understand stranded assets to mean the financing of real estate that has high GHG emissions and could therefore lose market value in the future.

Measures related to climate strategies

We have adopted a series of measures to manage our greenhouse gas emissions and reduce them in the medium to long term.

Banking operations

The projects implemented or planned in banking operations include:

• Introduction of target temperature corridors for the heating and cooling of office buildings;
• Gradual switch-over of the LLB vehicle fleet to electric vehicles.

In the coming years, we plan to further enhance energy efficiency by decommissioning older buildings and relocating to a new building (Campus Giessen) certified to LEED Gold and Minergie P Eco standards. This move aims to replace any remaining fossil fuels in Liechtenstein with renewable energy sources.

Our Green Team continuously proposes complementary measures related to the bankʼs operations. These make a small but important contribution on our path to net zero. Measures we have implemented in recent years include the introduction of reusable bowls and a waste separation system.

Climate change adaptation

In Liechtenstein, we have carried out a comprehensive analysis of the risk potential of natural disasters. Natural hazards such as earthquakes and floods have been taken into account. Based on existing hazard maps and our own analysis, we have defined precautions for the Eschen office and the data processing center. These aim to protect our infrastructure from heavy rain and the resulting backflow of surface water.

Own investments

The announced, almost complete withdrawal from companies in the fossil fuel sector has been carried out as planned during the reporting year.

Asset management and own funds

In recent years, we launched a range of responsible fund products and asset management solutions. All mandates now consider ESG criteria. In addition, the LLB ESG+ mandate for our asset management is the first tool we have created that enables clients to achieve a substantial and measurable impact. At least 45 per cent of the investments will be allocated to Article 9-compliant products in accordance with the SFDR, while the remainder will be broadly diversified, with at least some consideration given to our sustainability approach described above.

In asset management, the LLB Group has not only made mandate adjustments but also expanded its product range. The launch of the investment app wiLLBe offers a solution specially developed for small investors. This enables direct investments in shares via fractional shares, thereby opening up access to the capital market in a diversified form even with very small amounts. With wiLLBe, investors can invest in a total of seven sustainable topics.

Based on Article 9 of the SFDR, we have launched the first global impact equity fund domiciled in Liechtenstein. The objective is to replicate the MSCI World Climate Paris Aligned Net US Index. The index and fund are designed to overweight companies that are on a credible path to decarbonisation or those that offer green solutions.

Our Impact Bond Fund, also classified under Article 9 of the SFDR, is dedicated to the global bond market segment of Green Bonds. This allows investors to use their capital to support emission reduction measures. These include renewable energy projects, climate-friendly mobility, green buildings and energy efficiency projects. Both funds are instruments that customers can use to make their portfolio as climate-friendly as possible – with broad diversification across the two asset classes of equities and bonds.

Loans

As of 1 January 2024, the criteria entailed in our Umwelthypothek (environmental mortgage) were readjusted so that corporate clients are also able to benefit from this offer. The aim is to promote CO₂-efficient construction. If a new building meets the highest energy standards (GEAK Class A or B, Energy Certificate FL Class A or B, Minergie label), or if an energy-efficient renovation of an existing property is to be financed, customers receive an interest rebate.

Along with the expansion of our product range, we have also improved our engagement through the launch of a novel CO₂ and renovation calculator in the Liechtenstein market. Through this tool we offer easier access to information about energy-efficient renovations and current funding programmes.

All customer advisers in Liechtenstein and Switzerland have received comprehensive training on energy-efficient renovations to build in-depth knowledge about sustainability, climate goals, and CO₂ reductions. This means they are able to raise awareness among our customers about sustainable construction and energy-efficient renovations and to provide professional information about funding and the impact on the market value and rental price of the property.

Greenhouse gas emissions

We calculate our GHG emissions in accordance with recognised standards and report them accordingly; the framework for this is provided by the Greenhouse Gas Protocol (GHG Protocol). The scopes taken into account are those that are directly related to our banking activities and indirectly related to our value chain: Scopes 1, 2, 3.1 to 3.7 and 3.15.

Calculation methodology

We calculate the annual GHG emissions produced by our banking operations (Scopes 1, 2 and 3.1 to 3.7) in the first quarter of the following year. We first collect the underlying activity data (electricity consumption in kWh, kilometres driven for commuting, flight distances for business trips, paper consumption in kg, etc.) in the EcoCloud external GHG accounting tool and document the data source. The quality of the raw data is indicated as “exact”, “calculated” or “estimated”.

Our GHG emissions are reported in CO₂ equivalents (CO_2e). The conversion based on defined emission factors is carried out externally by the myclimate foundation. To do this, it first checks the plausibility of the raw data and models missing data by using values from the previous year, from comparable locations, from studies or from myclimate models as well as benchmarks. The greenhouse gasses CO₂ (carbon dioxide), CH₄ (methane), N₂O (nitrous oxide), HFCs (hydrofluorocarbons), PFCs (perfluorocarbons), SF₆ (sulphur hexafluoride) and NF₃ (nitrogen trifluoride) are taken into account for the calculation. The emission factors used by myclimate refer to the Global Warming Potential (GWP100), which calculates the climate impact of greenhouse gases over a period of 100 years. By definition, CO₂ has a GWP of 1. The climate impact of other gases is expressed in relation to CO₂, based on their effect and atmospheric lifetime. The results are then reviewed and validated by our experts.

The GHG calculation for the year under review included all locations in Liechtenstein, Switzerland, Austria, Germany and the United Arab Emirates. In 2024, we opened three new locations in Germany, which are now part of our GHG balance for the first time. Where possible, we use primary data. For reasons of efficiency or lack of data availability, this is not always feasible, which is why we make estimates or extrapolations in such cases. Our GHG emissions are reported using both a location-based and a market-based approach. Location-related Scope 2 emissions are based on the average emission factors of energy generation at specific locations. Market-related Scope 2 emissions are calculated on the basis of the electricity mix actually purchased by the LLB Group. Data quality, calculation logic and degree of automation are continuously improved.

Own investments, asset management and LLBʼs own funds

When calculating financed GHG emissions (Scope 3.15) in our own investments, asset management and LLB funds, we apply the standard of the Partnership for Carbon Accounting Financials (PCAF). The basis for this is our ESG database solution, which is based on information from the external data provider MSCI. Both reported and estimated GHG values of our counterparties are included in the calculations. In order to ensure a comprehensive and valid picture of our GHG situation, we also use additional adjustment procedures. For example, extreme outliers are adjusted, missing individual values are filled with the most recent available value or data is inherited along the company hierarchy.

Listed stocks and corporate bonds are included in the calculation because reliable and comparable GHG emissions data are available for these asset classes due to existing reporting requirements and established standards. Government bonds, on the other hand, have not yet been taken into account because there is no sufficiently standardised and methodologically consistent basis for directly allocating national GHG emissions. Furthermore, there is a lack of binding reporting obligations for countries that would ensure a consistent and transparent data foundation. As the PCAF standard hasnʼt been finalised, green bonds are currently being accounted for with the full CO₂ value of the company and are therefore likely overestimated. The coverage ratio provides transparent information about the proportion of assets for which we have data.

By using the procedure described, we increase data availability and ensure high data quality. Since our external data provider and the institutionalised data cleaning procedures of the ESG database cannot provide all CO₂ values, we have estimated the missing values using the average values of our portfolio. This enabled us to ensure that 100 per cent of the gross book values were covered. We continue to work on optimising the coverage of our data – for example, through more specific industry estimates.

For the GHG calculation in our own investments, we consider financial assets within the framework of Asset Liability Management (ALM) as well as strategic investments. The positions of the trading book are excluded, as it is immaterial for us due to the very low volume. Furthermore, we consider all asset management mandates, LLB funds, and the wiLLBe digital wealth management service. Advisory / investment counselling mandates, execution based on client orders (“execution only”) and private label funds are excluded.

Loans

The GHG emissions of the mortgage portfolio (Scope 3.15) are calculated once a year in accordance with the Partnership for Carbon Accounting Financials (PCAF) standard. First, the necessary raw data on the properties is collected and processed from internal systems, where available. This data includes basic information about the buildings (e.g. floor area, type of heating). After we have internally validated and anonymised the raw data, we forward it to the real estate specialist Wüest Partner AG. There, the data is supplemented with the additional information necessary to determine GHG emissions.

The calculations are based on standardised methods⁵, which take into account, for example, energy consumption for heating, hot water and electricity. The GHG emissions for each property and for the entire portfolio are determined on this basis. After our experts have verified the data, it is prepared for internal and external reporting. This approach enables a clear and reliable assessment of the GHG emissions of our mortgage portfolio.

Change in GHG emissions

For the year 2024, the LLB Groupʼs total GHG emissions amounted to 652ʼ828 t CO_2e (market-related). This means we can report a significant reduction of 20 per cent compared to the base year 2019; compared to the previous year, the decrease is 0.6 per cent. As expected from a bank, our investments (Scope 3.15) account for the majority of our total GHG emissions (more than 99 %).

5Includes SIA 380/1:2016 Heating demand (December 2016) and SIA 2024 Space Utilisation Data for Energy and Building Technology (October 2015).

GHG emissions of the LLB Group

We also succeeded in reducing the measure GHG intensity per net income. Based on this key figure, the LLB Group emitted around 5 per cent less GHG per net income in the 2024 reporting year than in 2023 (see table below). The relevant items for calculating the net income can be found in the consolidated income statement of the LLB Group.

GHG intensity per net income

Banking operations

Banking operations include Scopes 1, 2 and 3.1 to 3.7. For the year 2024, GHG emissions from banking operations total 4ʼ005 t CO_2e (market-related⁶), which is 11.0 per cent higher than the previous yearʼs figures, but 10.8 per cent lower than the value for the base year 2019. The year-on-year increase is partially due to a higher number of long-haul flights taken. There was also an increase in purchased energy (Scope 2), which is mainly due to the construction of new locations in Germany. The value for employee commuter traffic, which is responsible for around half of the LLB Groupʼs GHG emissions, remained almost unchanged compared to the previous year.

Compared to the base year, significant reductions are to be noted. More than 70 per cent of Scope 1 emissions and around half of Scope 2 emissions have been reduced, largely due to energy efficiency measures as well as the switch to green electricity and biogas. The decrease is 12 per cent for commuter traffic. The biggest counterpart to these positive developments is the substantial increase in business travel.

In the reporting year, we recalculated GHG emissions for 2023. The reported value differs slightly from the last reported value, which is due to an adjustment to the calculation methodology.

Across the Group, an average of 3.11 t of CO_2e was generated per employee (FTE) in the reporting year (2023: 2.98 t of CO_2e, market-related). This represents a relative increase of 4.36 percent. Compared to the base year 2019 (4.17 t CO_2e), we achieved a reduction of 25.42 percent.

Own investments, asset management and LLBʼs own funds

For the year 2024, the financed GHG emissions associated with our own investments and our asset management mandates as well as LLBʼs own funds total 3.52 million t of CO_2e (2023: 3.47 million t of CO_2e). The absolute increase of 1.4 per cent compared to the previous year results from a concurrent increase in gross book values of 8.8 per cent. As a result, we were able to reduce both relative GHG emissions compared to the previous year and absolute values
compared to our 2019 base year. The reasons for this long-term positive change are manifold:

• In terms of own assessment, the almost complete phase-out from the fossil fuel sector, in particular, has led to a significant reduction in financed GHG emissions.
• Since 2022, we have taken into account the GHG footprint of our counterparties, among other sustainability criteria, when making investment decisions and continuously monitor the effectiveness of our measures.
• The systematic exclusion of companies that generate more than 10 per cent of their turnover from coal for thermal use or from shale oil or gas proved to be particularly effective.
• The GHG emissions of our impact funds are significantly below the benchmark. It has therefore proven to be an effective tool for reducing our GHG footprint.
• Many of the companies we invest in have set ambitious GHG reduction targets and taken corresponding actions. Their current GHG data suggests that active measures are having an impact.

6This value corresponds to the sum of the GHG emissions of Scopes 1, 2 and 3.1 to 3.7 in the table “GHG emissions of the LLB Group”.

GHG emissions in own investments, in asset management and in LLBʼs own funds ¹

Change in GHG emissions in own investments, in asset management and in LLBʼs own funds ¹

Loans

For the year 2024, the financed GHG emissions in our mortgage portfolio total 101ʼ304 t of CO_2e. Compared to the previous year and the base year 2019, this is a significant decrease, which is, however, due to the changed data basis. The comparison is difficult because data availability and quality have changed and improved significantly in recent years. In the future, we will review whether we should recalculate the 2019 base year due to changing conditions regarding data availability and quality.

GHG emissions in the mortgage portfolio

Our average data quality score according to the PCAF standard is 4.2.

Offsetting of remaining greenhouse gas emissions

We assume that a 100 per cent reduction of our GHG by 2040 is unachievable. In line with the ESRS definition, we therefore intend to reduce our emissions by 90 to 95 per cent. How we deal with the remaining emissions depends heavily on available technologies, projects and certificates.

To date, we have offset GHG emissions in banking operations by purchasing CO₂ certificates. In this way, we support various climate change mitigation projects for CO₂ removal outside the value chain. These include the following projects: In Uganda, smallholder farmers in Alimugonza and Ongo Forest are promoting sustainable land use through reforestation and appropriate management of existing forests, which increases carbon absorption and strengthens biodiversity. In Nicaragua, small farming families in the Platanares Watershed are working together to reforest unused land and improve the quality of life of the population. In the DACHLI region, a pioneering programme for storing carbon in arable soils is being implemented to combat soil erosion and humus depletion. With humus-building measures, organic farmers are contributing to climate-friendly and food-secure agriculture.

In total, 1ʼ684.03 t of CO₂ certificates were verified in Uganda, 1ʼ684.18 t in Nicaragua, and 177.19 t in the DACHLI region in the reporting year, according to the recognised quality standards of Plan Vivo and myclimate. Retirement will take place after three years at the latest. In 2024, only Plan Vivo certificates were retired; the certificates from the DACHLI region were not retired. In Uganda and Nicaragua, the removal projects each account for 47.5 per cent of the LLB Groupʼs CO₂ footprint (excluding banking operations); in the DACHLI region, the figure is 5 per cent.

In the reporting year, we recalculated GHG emissions for 2023. Due to adjustments in the calculation methodology, the offset GHG emissions differ slightly from the reported emissions for 2023.

The certificates come from biogenic sources and contribute to sustainable development and climate change mitigation. The reduction or removal of greenhouse gas emissions through climate change mitigation projects is reported in Uganda and Nicaragua by Plan Vivo, while in the DACHLI region there is a strong reliance on the “Gold Standard SOC Framework”.

Retired CO₂ credits

The GHG emissions associated with our own investments and our banking products are currently not offset. We have not included the aforementioned CO₂ certificates in the calculation of our GHG emissions, meaning they have no reducing effect on the reported GHG footprint of the LLB Group. Instead, in accordance with legal requirements, we only report our gross GHG emissions.

Additional disclosure according to the Partnership for Carbon Accounting Financials (PCAF)

The table below shows the distribution of financed GHG emissions by asset class. Investments in listed equity and debt capital therefore make up the majority of the financed emissions. With regard to the Scope 1 and Scope 2 emissions of our counterparties, a slight decrease is noticeable compared to the previous year. When additionally taking the corresponding Scope 3 emissions into consideration, a small increase is noted.

GHG emissions by asset class

PCAF recommends maximum transparency possible regarding the exposure of financial institutions to GHG-intensive sectors. To meet this requirement for our investments (own investments, asset management mandates, and LLB funds), we are providing the information in the table below. Regarding these five GHG-intensive sectors, cement production has the largest absolute GHG emissions for Scope 1 and Scope 2 within the LLB Group.

GHG emissions by sector ¹