Impact, risk and opportunity management

Disclosure requirement related to ESRS 2 IRO-1 – Description of the processes to identify and assess material climate-related impacts, risks and opportunities

As explained in section E1 ESRS 2 SBM-3 “Material impacts, risks and opportunities and their interaction with strategy and business model”, VIG performed a scenario analysis in 2025 that considered the potential impacts, risks and opportunities of climate scenarios with global warming levels of 1.5°C, 2.0°C and 3.0°C. The analysis was carried out on the basis of a short-, medium- and long-term time horizon and includes the assessment of physical risks as well as transition risks that could arise from various climate scenarios. The scenario analysis is carried out, among other things, to assess the possible financial impacts under different warming paths and to derive appropriate actions. Detailed information on the classification of climate-related hazards and the identification of short-, medium- and long-term transition events can be found in the notes to the consolidated financial statements in the section “Risk strategy and risk management”.

The process of the consolidated double materiality assessment in relation to the evaluation of climate-related impacts, risks and opportunities is described in chapter ESRS 2 IRO-1 “Description of the processes to identify and assess material climate-related impacts, risks and opportunities”. The results in relation to the three sub-topics of “Climate change adaptation”, “Climate change mitigation” and “Energy” are presented below.

Material climate-related impacts

The contribution of greenhouse gas emissions and the consumption of non-renewable energies to global warming was identified as a material negative climate-related impact in the spheres of impact of underwriting, asset management and internal operations.

The core activity of insurance, underwriting, is a lever that can be used to contribute to a sustainable future. Although insurance products themselves do not cause any direct emissions, indirect climate-related impacts arise from the insured items, and thus indirectly through the provision of insurance cover, for example for buildings or vehicles, which emit emissions and thus contribute to global warming.

In asset management, climate-related impacts arise in particular from investments in high-emission industries and companies. The composition and alignment of the investment portfolio influences the climate impact and is a relevant starting point for managing climate risks.

In addition, internal operations generate direct and indirect emissions, for example from energy consumption in buildings and business trips. These activities also contribute, albeit to a small extent, to global warming and thus represent a climate-related impact of VIG.

The impact is managed as part of the VIG transition plan for climate change mitigation, which is described in detail in chapter ESRS E1-1 “Transition plan for climate change mitigation”. The specific actions used to address the impacts in the individual spheres of impact can be found in chapter ESRS E1-3 “Actions and resources in relation to climate change policies”. VIG’s emission reduction targets are also set out in chapter ESRS E1-4 “Targets related to climate change mitigation and adaptation” in connection with the transition plan for climate change mitigation.

Material climate-related risks

In underwriting, the physical risk of increasing frequency and severity of claims resulting from extreme weather events (e.g. more frequent rainfall or longer droughts) and natural disasters (e.g. flood risk resulting from climate change) has been identified, which in the medium term impairs insurability and the business model’s relevance.

More frequent natural disasters can also lead to higher gross losses. Severe weather events categorised as a 100-year event or more extreme have already occurred more frequently in the last two decades (e.g. flooding, hail, storms). Based on internal risk analyses, VIG considers the issue of flooding in particular to be especially relevant in terms of natural disasters.

Another risk in underwriting and asset management is that investing in and/or underwriting companies that do not adequately address their impact on climate change can lead to negative media coverage and reputational damage resulting in financial loss.

The assessment and pricing of climate risks by incorporating climate data and risk modelling into insurance terms and conditions enables the appropriate consideration of potential losses, which supports the long-term stability and sustainability of the insurance business. This has become particularly important in non-life insurance. In the corporate business, the local insurance terms and conditions are based on the individual risk situation of the respective policyholders. In individual cases, insurance can only be concluded once the proposed risk minimisation measures have been implemented.

In this respect, Risk Consult, as a subsidiary of VIG, makes a significant contribution to the implementation of the Group-wide strategy in the area of physical and transitional climate risks. The company supports industrial, commercial and financial customers in Austria as well as in Central and Eastern Europe in identifying, assessing and reducing risks arising from natural hazards and extreme weather events. The focus is on natural hazard management, technical risk analysis and preventive advice, with the aim of strengthening the physical resilience of companies and infrastructures and reducing the probability of loss in the long term. Around 2,000 business establishments are analysed each year, making an important contribution to making the economy more resilient against natural hazards. Thanks to VIG’s international structure, this expertise is used throughout the Group and adapted to local conditions.

In addition to the physical risk, a potential increase in losses due to a lack of awareness, insufficient risk assessment or lack of action by customers to reduce the impacts of insured events was also identified as a transition risk in underwriting. In liability insurance in particular, higher losses may occur due to a lack of preparation for climate change.

The physical risk of default or negative impacts on the creditworthiness of debtors as a result of an increase in extreme weather events has also been identified for VIG in the area of asset management. For example, natural disasters can lead to production shutdowns, which can have an impact on the ability to make repayments and therefore on the creditworthiness of companies in which VIG has invested. The corresponding risk is taken into account in the market risk. In addition, investments that only take sustainability aspects into account to a limited extent could represent transition risks, among other things. These could lead to losses in value due to changes or additions to the legal framework and have therefore been identified as material.

Information on the management of the identified risks, as well as the policies for managing the risks and the actions taken in the individual spheres of impact, are described in more detail in chapters ESRS E1-2 “Policies related to climate change mitigation and adaptation” and ESRS E1-3 “Actions and resources in relation to climate change policies”.

Material climate-related opportunities

The potential expansion of offerings and market reach due to a higher demand for and interest in insurance products covering extreme climate events was identified as a material climate-related opportunity in underwriting.

The European Insurance and Occupational Pensions Authority (EIOPA) shows that historically around 75% of climate-related disasters are not covered by insurance (see “Insurance Nat Cat protection gaps – A multidimensional approach” in the Eurofi Magazine, dated 11 September 2024). The reason for this is that state infrastructure in particular is not insured. Although the general public is expected to show a growing interest in insurance solutions for climate risks, these can only be offered within the scope of the available reinsurance capacity and, if necessary, with the involvement of state coverage (e.g. the discussion about increasing natural disaster coverage in Austria). Climate change mitigation actions taken in the area of underwriting therefore also require adjustments to products by extending the coverage where insurable. Insurance for environmental technology solutions offers the opportunity to offer new insurance products and services that cover extreme climate events.

However, this requires that these risks be insurable and that sufficient reinsurance protection be provided, since the increase in the potential risk from additional cover for natural disasters will result in higher costs for insurance service providers, which must be priced in a risk-adequate manner.

VIG’s investment opportunities in green bonds also offer another climate-related opportunity in asset management. Green bonds are a key instrument for financing investments that support climate and environmental objectives. In recent years, the market in the European Union has developed dynamically. In its publication “Green Bonds in Europe” of 1 July 2025 on its website, the European Environment Agency (EEA) states that the share of investment in green bonds in relation to all bonds issued by companies and governments in the European Union has increased significantly and reached around 7% in 2024.

Detailed information on the management of opportunities can be found in chapters ESRS E1-2 “Policies related to climate change mitigation and adaptation” and ESRS E1-3 “Actions and resources in relation to climate change policies”.

Disclosure Requirement E1-2 – Policies related to climate change mitigation and adaptation

The identified material impacts, risks and opportunities for VIG are addressed by appropriate policies, as described below.

Policies related to climate change mitigation and adaptation in underwriting

VIG is committed to helping its policyholders adapt better to climate change and to continuously increasing the range of products and services that support these efforts. Some VIG insurance companies offer specific products for this purpose.

To this end, VIG has developed the “Responsible Insurance” declaration, which includes self-imposed climate-related criteria defined by VIG for its corporate business. These criteria help to embed sustainability even more comprehensively in the core business.

VIG has not concluded any new insurance contracts for coal mining or coal power plant construction projects since 2019. Existing insurance contracts in this area are being gradually reduced. The updated requirements of the declaration mean that there is an obligation to pursue a declining underwriting strategy for existing risk insurance. In view of this, VIG insurance companies will not increase their engagement in insurance cover for coal-based energy. In addition, VIG does not offer risk coverage for unconventional oil and gas exploration. This includes shale gas and shale oil as well as all kinds of new deep-sea mining projects. In the interest of promoting the use of renewable energy sources, VIG has also been providing insurance for renewable energy sources such as wind and water power, photovoltaics and biomass in Central and Eastern Europe for many years.

Policies related to climate change mitigation and adaptation in asset management

VIG invests its premium income in such a way that it can fully meet its obligations to customers at all times. VIG therefore focuses on security in investments and prefers good credit ratings and thus stable returns. At the same time, however, VIG takes responsibility for the environmental impact of its investments and so implements expanded sustainability criteria. An important tool for decarbonising the investment portfolio is the portfolio analysis carried out in each of the local insurance companies as part of the sustainability programme, which focuses on the main greenhouse gas emitters in the portfolio. On this basis, the companies have developed an action plan for this group of emitters with the aim of putting the corporate bonds and equity portfolio on a development path in terms of the CO₂e footprint that is consistent with the net-zero target for 2050.

In addition, VIG pursues an engagement approach that promotes dialogue with investee companies and potentially investable companies to encourage them to improve the sustainable impact of their business activities. To implement this approach, VIG has entered into a collaboration with the internationally estabilshed engagement provider ISS ESG. The results of the engagement activities are published in an annual engagement report on the website. The declaration also aims to increase the share of investments based on the VIG Sustainability Bond Framework (e.g. renewable energies, environmentally friendly construction methods). In this regard, VIG successfully issued a Tier 2 sustainability bond with a volume of EUR 300 million in March 2025 as part of its active capital management. Following the first issue of a sustainability bond in 2021, it is VIG’s second sustainable bond and the first in Tier 2 format. Among other topics, the bond is intended to support green and social projects in the fields of renewable energy, green buildings and affordable housing.

Furthermore, VIG is striving to increase the share of investments in green bonds. In the reporting year, a total of EUR 1,838 million was invested in green bonds. This represents an increase of 24.9%* over the previous year. The sustainability characteristics of a bond are identified on the basis of publicly available data. The table below shows the development of VIG’s investments in green bonds since 2023.

The “Responsible Investment” declaration defines the following exclusion criteria for specific sectors:

• Thermal coal: VIG excludes new direct investments in companies that generate more than 5% of their turnover from thermal coal mining. The same applies to companies that produce more than 10 million tonnes of thermal coal per year. In addition, the exclusion criterion applies to companies that generate more than 5% of the total power generated or more than 10 GWh of energy from thermal coal. By the end of 2025, existing investments were reduced by more than 50% compared to 2019, and will be eliminated completely by the end of 2035 at the latest.

• Unconventional oil and gas: New direct investments in companies that generate more than 5% of their turnover from unconventional oil and gas are also excluded. This includes, for example, income from oil sands or shale gas.

• The declaration also defines social exclusion criteria, such as the exclusion of investments in companies that produce or trade in banned weapons.

Furthermore, the declaration includes the Ten Principles of the UN Global Compact on human rights and labour rights, and on environmental protection and anti-corruption measures. In the context of climate change adaptation and climate change mitigation, the exclusion criteria mentioned in the declaration for investments that violate the following principles of the UN Global Compact relating to environmental protection should be highlighted:

• Principle 7: Businesses should support a precautionary approach to environmental challenges;

• Principle 8: Businesses should undertake initiatives to promote greater environmental responsibility; and

• Principle 9: Businesses should encourage the development and diffusion of environmentally friendly technologies.

The application of the exclusion criteria of the declaration generally applies to direct investments (with the exception of securities issued by governments, federal states, regions, municipalities and supranational organisations), including such investments in consolidated investment funds of all VIG (re-)insurance companies. In addition to the climate-related exclusion criteria presented above, analyses are carried out for the VIG portfolio in connection with a climate risk report. In this regard, various scenario analyses are presented to show how company valuations could change in relation to transition risks and physical risks. These analyses help to show, among other things, whether the investment portfolio is aligned with the global temperature pathway of the Paris Agreement targets.

Policies related to climate change mitigation and adaptation in internal operations

Although the largest share of VIG’s greenhouse gas emissions is caused by the underwriting and asset management spheres of impact, greenhouse gas emissions are also generated in internal operations. VIG has leverage in this area that can be used to contribute to climate change mitigation. Further details can be found in the sustainability programme in ESRS 2 MDR‑P “Policies adopted to manage material sustainability matters”. VIG’s sustainability programme defines actions that address climate change mitigation, climate change adaptation, energy efficiency and the use of renewable energies. At the level of the individual companies, the emissions from internal operations can be analysed on a site basis in order to derive targeted actions.

Disclosure Requirements E1-3 – Actions and resources in relation to climate change policies

The following section addresses the actions and resources in relation to VIG’s climate change policies. The table below contains the decarbonisation levers identified for each sphere of impact in accordance with the transition plan for climate change mitigation. It sets out both the strategic levers and the actions to be taken in the course of the implementation of the transition plan for climate change mitigation. The subsequent subsections each address the individual spheres of impact in more detail. They explain how the decarbonisation levers work in practice and which actions are planned or have already been implemented in accordance with the transition plan for climate change mitigation.

Actions and resources in underwriting

In underwriting (corporate portfolio), the net-zero target is to be achieved, among other things, by continuously expanding the range of environmentally friendly and sustainable insurance products. Balancing portfolios using the best-in-class approach is also one of the actions that can be taken in this area. In doing so, a stronger focus will be placed on the insurance of sectors with lower emissions. In this regard, the corporate underwriting portfolio is analysed at the individual company level on the basis of the absolute greenhouse gas emission and a programme of actions and activities is developed for the main greenhouse gas emitters with the aim of aligning the corporate portfolio with the net-zero pathway. In this respect, it will be very important to engage with policyholders in order to support them on the path set out in the transition plan for climate change mitigation. In the reporting year, insurance companies also increasingly used the leverage of customer engagement to improve data quality for calculating the emissions of insured customers and to enter into an active dialogue about their sustainability goals and development. Some insurance companies also support their customers through risk assessments and on-site inspections by Risk Consult (see also ESRS E1 Disclosure Requirement related to ESRS 2 IRO-1 “Description of the processes to identify and assess material climate-related impacts, risks and opportunities”) or through their own risk consultants, providing specific recommendations for risk mitigation – flood, storm or fire protection measures, for example – and offering in-depth vulnerability analyses, if desired. When interacting with customers, the focus is primarily on advice, education and cooperation, with the aim of strengthening their resilience to extreme weather events and their risk awareness.

Actions and resources in asset management

In order to achieve the net-zero target in selected investment portfolios by 2050, greenhouse gas emissions will be given greater consideration in future investment decisions. To this end, the VIG companies currently in the transition plan are continuously evaluating opportunities for green investments in the investment portfolio and are gradually reducing or terminating investments in high-emission companies. In addition, investments are made in companies whose emission intensity aligns with the defined targets. Investing in green bonds actively contributes to the financing of the ecological transformation and specifically supports projects in climate change mitigation, renewable energy and sustainable infrastructure. At present, green bond issues are treated as equivalent to traditional bonds and are taken into account in the transition plan for climate change mitigation at issuer level. This means that the emissions are not calculated on the basis of the individual bonds, but at the overall company level. For the real estate portfolios, heating conversions from gas to district heating and conversions to green electricity were identified as effective actions.

Actions and resources in internal operations

The areas of energy consumption and the vehicle fleet were identified as the biggest decarbonisation levers in VIG’s internal operations. Actions include, in particular, improving energy efficiency, switching to energy suppliers with a lower greenhouse gas intensity, expanding the fleet of electric vehicles and vehicles with lower fuel consumption and adopting a conscious approach to the use of these vehicles. There is also investment in the generation of electricity from renewable sources for self-consumption. In the reporting year, the local companies focused primarily on reducing energy consumption and increasing the use of renewable energy, for example by purchasing green electricity or purchasing green electricity certificates. They also analysed the fuel consumption of their own vehicle fleet and implemented targeted actions to reduce consumption, including by switching to electric vehicles or other more energy-efficient vehicle solutions. For further information on the emission reductions resulting from the climate change mitigation actions already implemented, please refer to chapter ESRS E1-6 “Gross Scopes 1, 2, 3 and Total GHG emissions”.

The aim is to disclose the significant CapEx amounts and allocate the relevant figures to the key performance indicators in accordance with Commission Delegated Regulation (EU) 2021/2178 for subsequent reporting years.