During the Bank’s ESG due diligence, factors triggering risk escalation management include negative public sentiment, environmental impacts, governance deficiencies, regulatory penalties, change of third-party ESG evaluation or rating, and similar events. Specific scenarios encompass:

· External ESG ratings and industry rankings;

· Frequency of pollution-related legal actions within the past three years;

· Production safety incidents over the last three years;

· Verified complaints related to product and service quality, health, or safety impacts within three years;

· Confirmed corruption cases and remedial actions taken;

· Other adverse events, such as abnormal stock reductions, share pledges, administrative penalties, executive legal violations, and affiliate risks.

Upon triggering these risks, the Bank conducts supplemental investigations to assess anomalies and strengthens risk controls. The “Environmental Protection One-Vote Veto System” is strictly enforced. For high ESG-risk clients, environmental compliance is mandated as a pre-condition for credit utilization. Post-disbursement, ESG metrics are embedded in post-loan monitoring, with automated alerts for environmental penalties pushed to managers via the early warning system. In cases of major ESG risks, measures such as accelerating loan maturity, reducing exposure, or reclassifying asset risks are deployed to mitigate impacts.

For critical ESG risks, based on the nature of the risk and the severity of the risk, the Bank formulates tailored strategies, including additional investigations, credit plan adjustments, enhanced risk mitigation, or portfolio reduction, and tracks implementation outcomes. Clients or projects violating national policies, failing to rectify violations, receiving “environmental warning” or “non-compliant” ratings, facing litigation due to environmental and climate issues, or deemed high-risk by authorities are subject to the “Environmental Protection One-Vote Veto System”, barring credit access.

 *The English version were translated based on the Simplified Chinese version. In case of any discrepancies among the versions, the Simplified Chinese version shall prevail.