Lloyds Banking Group Plc (2025)

https://www.lloydsbankinggroup.com/assets/pdfs/investors/financial-performance/lloyds-banking-group-plc/2025/q4/2025-lbg-sustainability-report.pdf – Page 127-131.

Lloyds Banking Group is a signatory to The Equator Principles 4, which is a risk management framework for determining, assessing and managing environmental and social risk in Project Finance related transactions, such as large scale energy, industrial or infrastructure projects. At client and transactional level, ESG-related risks, including environmental, social and governance factors which may present financial implications for both the client and the Group, are assessed and embedded into our credit risk management framework in line with regulatory expectations and best practice. All lending decisions are based on a comprehensive credit risk assessment of potential borrowers which includes credit, financial and other factors as part of our broad multi-factor risk assessment framework. It ensures that where we provide finance or advice for such deals, it is executed in a responsible manner, and reflects the importance of environmental and social risks and impacts. Where any such impacts are unavoidable, they must be appropriately mitigated or offset. We have a robust approach to the review and reporting of the Equator Principle transactions, due to our internal referral and risk assessment process. This includes detailed Environmental Due Diligence and Technical Advisor reports being a key requirement in our analysis of Project Finance transactions, alongside engagement with environmental consultants, enabling us to make responsible business risk decisions.

We have defined ESG risk triggers to identify higher-risk cases, which are then subject to enhanced due diligence by our internal ESG Risk specialists. Examples where enhanced ESG due diligence is required include cases that are within scope of The Equator Principle or where there are potential conflicts with our net zero guardrails or the requirements of our External Sector Statement. This process is integral to our control framework, ensuring that our lending complies with our ESG commitments. As part of our ESG credit risk management framework, clients and transactions are assessed using our ESG tool which assigns individual risk scores. Relationship managers are responsible for evaluating the clients’ activities in relation to the Group external sector statements, with controls built into our ESG tool to identify potential conflicts for enhanced due diligence.

Relationship managers are to consider and attest that our clients are in adherence with The Equator Principles, with second line oversight provided by credit officers and our specialist ESG credit risk team where appropriate. All cases escalated are approved by a designated business representatives or legal entity accountable executive. Where specific or material environmental risks or concerns are identified, these may be referred to external risk consultants for an opinion on the adequacy of the mitigants in place or recommendations on managing the risk. The key findings from such due diligence are factored into credit applications and will be considered as part of the credit decisioning process.

We also recognise the heightened environmental, social and governance risks associated with activities in a number of sectors which we deem to be higher risk. As such, we ensure enhanced due diligence is undertaken for new/ additional finance requests where material concerns are identified. We have retained external consultants where we can seek additional advice or recommendations at a counterparty or transactional level.
More detailed information on our ESG Credit Risk management processes, of which The Equator Principles processes are a sub-set applicable to specific transaction types, is available on page 127 to 131 of our Lloyds Banking Group sustainability report 2025.