Environmental Management

“We communicate with the environment through finance.”

Principle: Shinhan Financial Group understands that environmental problems have an important impact on the sustainable development of a company. Therefore, we have actively minimized the greenhouse gas emissions through efficient use of resources and energy, manage green financial products by supporting the green industry and green lifestyle, and strengthened the green communication with stakeholders.

Objective: Shinhan Financial Group will become a green leader in the financial industry by establishing an implementation system for Environmental Management to achieve the society’s happiness and the group’s sustainable growth, while also expanding the group’s green synergy products and services.

PERFORMANCE

Sustainable Environmental Management

Shinhan Financial Group recognizes that sustainable development, which ensures balanced profits between the present and future generations, is determined by positive interactions between economic development, social development and environmental protection. Also, we cooperate with other economic areas to achieve common environmental goals within the market mechanism by sharing the view that sustainable development is a joint responsibility of the government, enterprises and individuals. In addition, we established the group’s environmental management standards’ through the group’s Social Contribution Committee, which is participated by CEOs of the group and its affiliates. As a result, we will strive to set up systematic environmental policies at the group level and implement environmental management more effectively.

Major details of Shinhan Financial Group’s environmental management standards

Major details of Shinhan Financial Group’s environmental management standards
Classification of policies	Details
Effectively using resources and minimizing greenhouse gas emissions	Effectively use resources and energy Reduce greenhouse gas emissions Take the eco-efficiency of products and facilities into consideration
Developing and supporting green financial products	Support financing for green enterprises Support financing for green consumers Expand investment on green industries
Strengthening of green communication	Strengthen the Environmental Management capabilities of employees Strengthen green partnership with partner companies Disclose environmental management performances and cooperate externally

We implement Environmental Management to achieve sustainable growth.

Shinhan Bank has been implementing the Green Bank Program to create shared values for society, while also seeking society’s happiness and the company’s growth. In order to achieve the strategic goal of ‘realizing green banking for sustainable growth’, we selected and implemented the Green Bank Program as the CEO’s medium and long-term management direction. We expanded the Environmental Management by selecting 8 implementation tasks in three areas to achieve strategic goals as follows: 1) improving the environment through it’s bank’s financial business; 2) implementing advanced Environmental Management as a corporate citizen; and 3) managing environmental risks as an environmental monitor.

Response to Climate Change

Shinhan Financial Group understands the importance of preventing major issues related to environmental pollution, using sustainable resources, protecting the environment and natural habitats. We will make diverse efforts to implement the Environmental Management from the perspective of ‘making the world a better place with financial strength’, which is the group’s reason and purpose of existence. In particular, we recognize that joint responsibility should be taken on greenhouse gas emissions, which is regarded as the main cause of climate change. Therefore, we are working on response measures from two perspectives, including the reduction efforts made to minimize greenhouse gas emissions from the organization and the response efforts made to deal with climate change.

We work on reducing greenhouse gas emissions.

In 2010, Shinhan Financial Group identified the sources of the group’s direct and indirect greenhouse gas emissions and established a greenhouse gas inventory system that defines the responsibilities of the organization according to the internationally agreed standard. In 2012, we established an environmental performance system to reduce and define the financial company’s environmental performance indicators, such as the use of paper, green procurement and water resources, exceeding greenhouse gas inventory.
On June 2012, Shinhan Bank was designated as a company of ‘the Greenhouse Gas & Energy Taget Management System’ based on the Basic Act on Low Carbon Green Growth. After completing the third party verification of greenhouse gas emissions and energy consumptions between 2009 and 2012, we reported the results to the government. In particular, we continuously improved the energy efficiency by being the first in the Korean banking sector to acquire the ISO50001 as a means of reducing greenhouse gas emissions.

We adapt to climate change with carbon neutrality.

After holding the annual comprehensive performance assessment ceremony participated by all employees as an environment-friendly event for minimizing the use of resources and energy Shinhan Bank has been receiving the certification for carbon neutrality from the Korea Energy Management Corporation.
Through these activities, we enhanced the awareness of employees and local communities regarding environmental protection and climate change. In particular, it provided an opportunity to launch the ‘Green Love’ package, which improved the environment-friendly interests of financial consumers. Meanwhile, in May 2012, we made ‘the Guideline for Reducing GHG Emissions’ together with the Korea Environmental Industry & Technology Institute to be distributed to the head office and sales offices, making efforts to actually respond to climate change by reflecting it in relevant regulations, including the guideline on procurement and asset management.

Amount of GHG emissions

Amount of GHG emissions
Classification of emission source		2010	2011	2012
Total amount of GHG emissions		112,829	111,644	111,684
Scope 1	Direct emission	21,138	20,040	18,284
Scope 2	Indirect emission	91,691	91,604	93,400

*      Scope of data collection was restricted to 6 major group companies: Shinhan Bank (head office, all sales offices and management facilities); Shinhan Card
        (head office, Dangsan branch, Yeoksam branch); Shinhan Investment (head office, annexed building, Gumi, Ulsan, Yeosu branches); Shinhan Life (head
        office, Cheonan Training Institute, Namwon, Jeonju branches); Shinhan BNP Paribas Asset Management (head office); and Shinhan Capital (head office).
**   The greenhouse gas emission of Shinhan Bank for 2010~2012 was certified by DNV, which is a third party certification body.
*** The data of the five affiliates, excluding Shinhan Bank, was calculated by applying the same emission factors, calculating formulas and operational
        of the Greenhouse Gas Inventory Report (2007-2009), which has been certified by DNV.

Other greenhouse gas emissions

Other greenhouse gas emissions
Classification of emission source	Unit	2010	2011	2012
Total business trips (by air, road, etc.)	Km	507,486	502,184	1,982,727
Greenhouse gas emissions resulting from business trips	tCO₂eq	40.48	36.82	90.94

* Data derived from the comprehensive Environmental Management system, which is Shinhan Financial Group’s environmental data management system. It is
   the distance of business trips by bus, railroad and domestic air service. The year in which each affiliate started to manage the distances of business trips are all
   different. Therefore, those that fall under each year are different.
   - 2010~2011 : 3 affiliates, including Shinhan Financial Group
   - 2012 : 5 affiliates, including Shinhan Financial Group

Resources and Energy Saving

In order to support the monitoring and decision-making process to continuously improve the environmental performance, Shinhan Financial Group upgraded the group’s comprehensive Environmental Management system in 2012. By taking the request of internal and external stakeholders and the applicability of utilizing information into consideration, we selected 12 indicators related to the environment. In particular, we took the initiative in reflecting the energy management into the system. As a result, we plan to systematically implement the group’s Environmental Management.

All of our employees participate in energy improvement activities.

In 2012, Shinhan Bank effectively implemented energy management by establishing the guideline and manual for energy management and continually improved the energy performance to establish a system that reduces energy cost. The energy management system (ISO50001) refers to a company-wide energy improvement activities that carry out energy reduction participated by all employees, including the management of the company. Through this, we increase the level of interest on reducing energy and establish a decision-making system based on the analysis of plans and data to focus on reducing energy. In particular, we adopted a bank-wide energy management system by establishing a computer system to reduce energy use, which was the main culprit of greenhouse gas emissions. It is expected to have an effect of responding to regulations, reducing costs and improving brand values.

Reducing costs through environment-friendly activities

Reducing costs through environment-friendly activities
Classification	Details of activities	Annual amount of greenhouse gases reduced (tCO2eq)	Annual amount of reduction (KRW 1 million)
Increasing energy efficiencies of buildings	Reduce the amount of energy use by replacing the lighting of the bank’s head office, general and sales offices into LEDs (total of 17,357) Carry out additional programs in the case of buildings that require replacement within the next 5 years	3,915	330
Making energy conservation a part of everyday life	Wear simple clothing during the summer season for all employees to make energy conservation a part of everyday life	19.92	160
Reducing the amount of paper used	Introduce the ‘image processing system for loan review documents’ to allow loan reviews to be done by searching the system Establish a paperless culture through the company to improve job concentration and work efficiency by simplifying the work process through less publishing, binding and entering of libraries	15	*185

* KRW 168 million (converted amount of personnel expenses from reducing working hours) + KRW 17 million (amount of reducing approximately 1,140 boxes
of A4 papers)

Promotion of Green Finance

Shinhan Financial Group supported outstanding green enterprises that engage in environment-friendly industries based on green finance and developed fixed deposit products to encourage environment-friendly lifestyles from individuals.

We create new social values through green financial products.

Shinhan Financial Group develops an environment-friendly green finance culture together with consumers, enterprises and local communities through releasing diverse green financial products. We are making efforts to create new social values through the environment that is closely related to our lives, such as expanding the loan support to environment-friendly green enterprises, encouraging the environmentfriendly lifestyles of individual customers, and supporting the environment-friendliness of social goods.

Increasing the support to enterprises engaging in green industries
In August 2011, Shinhan Bank supported loans to enterprises that want to enter into green industries and enterprises engaging in green industries,
thereby releasing the ‘New Green Corporate Loan’, which contributed in facilitating the new growth engine market of green industries. It provided preferential benefits on interest rates and commission fees for outstanding green enterprises. As of the end of 2012, we supported new loans of approximately KRW 800 billion.

Encouraging environment-friendly lifestyles of individual customers
Shinhan Bank, in reagrds to the energy problems that have become social issues recently, has signed an agreement with the Korean Energy Management Corporation to release the ‘Green Love Energy Fixed Deposit Account’, which is a deposit product that provides energy donations to customers who purchased financial products, or gives preferential interest rates to customers who saved energy. When developing this product, we collected opinions on the awareness of energy conservation, green finance and the conditions of joining green finance deposits by receiving opinions beforehand through surveys conducted by the ‘customer evaluation group’. Therefore, we were able to encourage individual customers to gain environment friendly mindsets and lifestyles in their daily lives. Meanwhile, we were recognized for the environment-friendly results from ‘Green Love’ package products, including the Green Love Energy Fixed Deposit Account and the Green Love Life Installment Savings, to receive the first prize at the 18th Maekyeong Financial Product Award hosted by the Maeil Business Newspaper.

Environment-friendliness of social and public facilities
Shinhan Bank reduced the expenses of energy use by supporting the replacement of LED light bulbs for the underground parking lots of public buildings, while also releasing the ‘Green Love Energy Factoring’, which is a loan product that prevents the occurrence of various crimes with well lit facilities. The ‘Green Love Energy Factoring’ is a loan product where the bank first supports the expenses used in improving the energy efficiency of facilities, such as replacing LED, and the energy user repays the construction fee to the bank with the money saved from using less electricity. It has emerged as a representative example of creating new environmental and social values through finance.

We monitor the environmental risks when supporting loans.

When supporting corporate loans, we provide loans by determining whether or not the company is environmentally outstanding. In order to manage companies with excessive environmental risks, we signed an agreement with the Ministry of Environment and the Korea Environmental Industry & Technology Institute in 2012 to be the first in the Korean financial industry to adopt the corporate evaluation system for supporting green finance.

We open the green finance together with our stakeholders.

Communication with internal stakeholders
In order to review the Shinhan bank’s strategic direction and listen to internal progress updates and outside expert’s opinions regarding environmental issues facing the organization, Shinhan Bank has been implementing the Green Bank Seminar half-yearly since 2011. Also, in order to improve the employee’s environmental awareness, we implemented the Environmental Management Cyber lecture for all employees to enhance their understanding about sustainability management. In 2012, we carried out various activities to encourage participation, including surveys and questionnaires, to have approximately 2,500 participants participating in the Green Bank Questionnaire and Survey. Meanwhile, we plan to increase the establishment of a green supply chain system by expanding the purchase of environment-friendly and energy efficient products and supporting programs to strengthen the environment management capabilities of partner companies.

Communication with external stakeholders
Since Shinhan Bank recognizes the importance of the environment like other global financial institutions, Shinhan Bank has been participating in the UNEP-FI (United Nations Environment Programme Finance Initiative), and CDP (Carbon Disclosure Project) to maximize the results of facilitating green finance by benchmarking and promoting best Council, which is attended by the management of commercial banks to carry out domestic council activities, and the Green Economy Research Council, which is participated by the working-level employees of the financial industry and the environmental experts from the government and academia, to listen and benchmark the opinions of outside institutions and experts.