3 Responsible financing

Relevance of the topic for SZKB and its objectives

Opportunities and risks relating to business conduct vis-à-vis clients can be divided into an inside-out perspective and an outside-in perspective:

• Inside-out: The impact of SZKB’s financing activitieson the environment: SZKB’s financing activities have a direct impact on environmental, social and economic aspects. Through targeted lending, the Bank can foster innovation, create jobs and support sustainable projects, for example. At the same time, it helps to positively structure regional and supra-regional developments by promoting responsible business practices. However, financing also entails risks such as high CO₂ emissions, poor working conditions or a loss of biodiversity.

• Outside-in: The impact of external factors on SZKB’sfinancing activities: SZKB’s financing activities are influenced by external ESG factors such as climate change, regulatory changes and societal trends. Climatic risks, such as physical damage to assets or interruptions in supply chains, can affect the creditworthiness of borrowers and thus increase the risk of credit defaults. In addition, stricter legal requirements in areas such as environmental and social standards have a direct impact on the economic stability of client companies.

For this reason, SZKB has defined «financing a sustainable property», «access to sustainable financial services» and «climate change» as key topics in the area of responsible financing¹.

As part of its responsible financing strategy, SZKB has defined the following targets:

• Development of financing products that foster and support sustainable behaviour
• Raising awareness among clients
• Raising awareness among employees
• Creation of incentives, such as favourable interest rates, to facilitate a decrease in emissions intensity
• Support with the generational transfer of a property

Due to its balance sheet volume and its contribution to business income, the lending business will play an important role in SZKB’s business model. The Bank focuses on business with private, commercial and corporate clients primarily in the Canton of Schwyz and neighbouring regions. Being the largest lender in the Canton, SZKB wields influence over the flow of funds through loans and investments. It therefore plays a key role in the sustainable development of the Schwyz economic region and assists private, commercial and corporate clients over generations.

¹The key topic of «climate change» and the related targets are covered in Chapter 5 Climate Report and are not addressed in this chapter.

Management approach

A sustainable mortgage portfolio
As the leading bank in the Canton of Schwyz for private and corporate clients, SZKB is primarily active in the mortgage business and concentrates on its market area. This includes the Canton of Schwyz and neighbouring regions in which SZKB possesses extensive market expertise. The regional allocation is based on the location of the property for mortgage insurance and the debtor’s domicile for all other types of insurance. The Schwyzer Kantonalbank Act limits the foreign assets of SZKB to a maximum of 5% of the balance sheet total. As a result of internal regulations, the financing business can account for a maximum of 0.5% of this. Mortgages are not granted to clients with covered properties outside Switzerland. Whenever a mortgage is granted, both affordability and the loan-to-value ratio are examined, including from a sustainable perspective.

The advice given to clients of owner-occupied properties considers ESG issues and raises their awareness at the same time. SZKB has made the topics of sustainability and energy efficiency an integral part of the consultations with private clients. With sustainable products, such as the «handshake mortgage», issues such as energy-efficient renovation are addressed in the consultation. A variety of tools, including the myky partner platform or factsheets, are used for illustration purposes. By partnering with myky, a property projection can be created for clients using an online application, which makes it possible to establish the energy status. For more detailed advice, clients are referred to external experts.

Sustainable loan portfolio

SZKB manages the impact of responsible financing also through the credit products it offers and the established credit processes. To date, SZKB has not yet recorded any exclusions in internal documents or regulations in the lending sector. In the future, it will complement established credit processes by incorporating sustainability aspects in the interests of the environment.

Special sectors:

• Due to the restriction on foreign engagement and sectoral composition, as of 31 December 2025; there is no direct financing in the following areas: Arctic drilling, oil sands/fracking, coal extraction, mining. SZKB operates regionally and therefore has minimal involvement with high-risk ESG practices or industries that cause significant environmental damage (e.g. deforestation, deep-sea fishing, mining).
• Agriculture in Switzerland, and in the Canton of Schwyz in particular, is dominated by small-scale farms. The average usable area per farm in the Canton of Schwyz is 16 hectares. SZKB does not have any exclusions in place for financing specific business sectors. The regulations of the Canton determine the maximum amount of financing available for the specific agricultural enterprise. Legislation sets out extensive requirements for land management (environmental protection, biodiversity, water protection, sustainable land use) and animal welfare. Control mechanisms have been put in place by the state. The financing of agricultural properties is regulated in an internal SZKB directive, which is based on the legal requirements laid down by the Federal Act on Agricultural Land Law (BGBB) as well as on the cantonal regulations.
• SZKB also provides financing for companies that produce renewable energy, specifically in the areas of district heating and hydropower. Furthermore, loans are provided to support smaller-scale solar power installations and energy- efficient renovations for private, commercial and corporate clients, as well as non-profit housing developers. SZKB also provides financing for hospitals, retirement and nursing homes and other social institutions and handles student loans granted by the Canton of Schwyz.

SZKB does not offer consumer credit.

Sustainable financing products
Financing solutions for the energy renovation

SZKB launched its «handshake mortgage» as a standardised product for financing energy-related renovations at the beginning of 2024. With this product, SZKB clients with owner-occupied properties in the Canton of Schwyz can benefit from subsidised loans up to a maximum of CHF 75,000, additional advice and a surety from the surety fund financed by SZKB for measures intended to increase the energy efficiency of their properties. Application and processing have been simplified for clients, and interest has been made extremely attractive in order to create additional incentives for energy-efficient renovations. The solution is free of charge and interest-free in the first year. The arrangement is also characterised by flexible use and processing. In addition, the sustainability bonus was introduced in spring 2025. In this way, all clients benefit from preferential terms on the financing of loans of up to CHF 500,000. The measures pursued under the aegis of the building program in the Canton of Schwyz, as well as the widely used sustainability certificates in Switzerland, are key factors taken into account by the Bank when awarding the sustainability bonus.

Supporting clients throughout all phases
As a generational bank, SZKB supports its clients in the transfer of residential property within the family. For this purpose, with the multi-generation mortgage SZKB has developed a consulting solution that considers the individual circumstances and needs of clients. SZKB offers a tailored solution that is suitable for both current and future homeowners. For this purpose, individual circumstances are discussed, and the needs of all parties involved are examined in a personal meeting. The comprehensive expertise of client advisors in the areas of asset accumulation, asset management, financing and pensions is provided holistically to clients and their families before, during and after the transfer. In addition, a selection of proven financing products that are individually tailored to the respective situation are offered.

The multi-generation advisory solution is comprised of four pillars:

1. Clarifying the financial basis
2. Identifying targets in relation to the home
3. Finding the right solution
4. Transferring the property

Financing regulations
SZKB defines general financing rules in an internal directive. Among other things, it states that creditworthiness and credit eligibility must be checked in relation to each commitment. SZKB is willing to support its clients even under challenging circumstances, also as part of its statutory mandate. SZKB supports clients throughout all phases and across generations. For this purpose, it has developed a consulting solution for the transfer of an owner-occupied property to the next generation that considers the individual circumstances and needs of clients.

The internal directive on non-performing commitments requires, among other things, that clients with higher default risks must receive specific support from a specialist recovery team. SZKB is committed to working with its clients to identify sustainable solutions whenever possible. It is also possible to make adjustments to the loan terms, taking into account the default risk. SZKB supports its clients with a practical approach and examines individual contributions to financial stabilisation. The aim is to cooperate with the aim of developing viable solutions that promote both client success and risk minimisation. Thus, provided that the client’s renovation has a positive long-term effect and the client also makes a contribution, SZKB may consider measures such as repayment agreements, partial debt waivers or interest exemptions. The SZKB recovery team supports client advisors in relation to non-performing commitments and provides training for this purpose (recovery in situ: some of the information is the same for all sales units (what recovery does, general approach, etc.)). In addition, individual positions are discussed. The processes and guidelines are set out in an internal work instruction on mortgages and credit monitoring. The risks taken must always be quantifiable. Individual establishments or sectors are not kept on their feet simply for the sake of it.

SZKB also works with the Guarantee Fund of the Canton of Schwyz to provide clients with access to additional sources of financing. The Guarantee Fund is a cantonal institution with a legal personality, and its registered office is in Schwyz. The purpose of the fund is to provide guarantees for loans, credits and guarantees for natural and legal persons resident or domiciled in the Canton of Schwyz who prove to be creditworthy and trustworthy. The fund is used to guarantee loans, credits and guarantees for which no or no fully bankable cover can be provided and which are needed for the following purposes:

1. For the acquisition, construction, maintenance and improvement of residential buildings, condominiums as well as commercial and agricultural real estate (real estate loans)
2. For the construction, maintenance, improvement and expansion of service enterprises as well as commercial, industrial and agricultural businesses (operating loans)
3. For start-up and venture financing of companies
   

SZKB is responsible for reviewing applications and processing such loans. With this instrument, Schwyzer Kantonalbank can provide additional clients with sustainable access to financing, which also supports the promotion of business activity in the Canton of Schwyz.

Key measures

During the reporting year, SZKB focused on «financing a sustainable property» and «access to sustainable financial services» as key topics in the area of responsible financing:

• Developing a sustainable credit portfolio and improving its quality overall
• Providing energy-efficient renovation products and further developing them
• Raising awareness of employees and clients

Developing a sustainable credit portfolio and improving its quality overall

SZKB is heavily active in the mortgage business and focuses on its core markets in the Canton of Schwyz and neighbouring regions. Thanks to its long-standing market knowledge and close client relationships, it is able to respond in a targeted and sustainable manner to the needs of its private and business clients. The regional allocation for mortgages and other types of financing is based on the location of the property for mortgage insurance and the debtor’s domicile for all other types of insurance.

Providing energy-efficient renovation products and further developing them

The SZKB introduced the sustainability bonus in 2025 with the aim of specifically promoting energy-efficient renovation as well as the sustainable construction of real estate. Clients with fixed-interest mortgages benefit from an interest rate reduction of 0.3 percentage points on a maximum loan principal of CHF 500,000. This creates a tangible financial incentive for the Bank to support investments in measures to improve energy efficiency and preserve value. The sustainability bonus complements the existing range of financing products in the area of energy-efficient renovation and is being continuously reviewed and further developed in order to meet the increasing demands imposed by the market and regulations. With this initiative, SZKB is actively helping to reduce CO₂ emissions in the building sector and supporting its clients on the way to a sustainable property.

Raising awareness of employees and clients

SZKB has implemented the binding guidelines of the Swiss Bankers Association (SBA) on sustainable finance on time, which also requires long-term value preservation (in particular the need for energy-efficient renovation) to be addressed as part of the advisory process. Client advisers are specifically trained in SZKB’s advisory philosophy. This means that sustainability, ESG aspects, and energy efficiency are integral parts of investment, asset management and mortgage advice, which also results in a greater awareness and appreciation of long-term value preservation and energy- efficient renovations. In addition, the Clever@SZKB series of talks improves the financial and sustainability knowledge of the local community in Schwyz, including the topic of «renovating your home» (see Chapter 2.1.2 «Client satisfaction», section «Providing training and courses for clients» and 2.3.3 «Fostering the local community and economy», section «Enhancing social engagement and fostering financial literacy»).

SZKB is seeking to improve the level of training and awareness of its employees in relation to sustainability through a wide range of training options. These include, among other things, a bank-wide ESG e-learning course covering topics such as energy-efficient renovations and sustainable investments for front-office employees, as well as certified external specialist courses for selected employees and managers (see Chapter 2.2.2 «Diversity and integration», section «Education and training at SZKB»).

Assessment of effectiveness

During the reporting year, the focus in the area of responsible financing lay on the implementation and further development of products as well as on raising employee and client awareness. SZKB has achieved the following milestones:

• SZKB made further progress on the sustainable alignment of its loan portfolio during the reporting year. Through targeted product developments and training measures, the integration of sustainability aspects into the core business was further enhanced. As such, SZKB is helping to preserve long-term value within regional real estate stock.
• In the area of lending, SZKB supports the sustainable development of its portfolio through careful risk and property analyses as well as a strong regional focus. This enables targeted support to be provided to clients in the financing of energy-efficient and future-fit properties. In addition, a roadmap for adopting a catalogue of ESG criteria as well as exclusion criteria for the financing process has been put in place. These requirements will start to be integrated gradually into the relevant processes over the coming year. Implementation is expected to result in further qualitative development of the loan portfolio over the coming years.
• The efficacy of the measures is reflected by the continuous development of the solutions offered as well as in the expansion of knowledge, processes and products. In 2025, numerous ambassadors from Sales received training and can now pass on their know-how within the organisation, thereby making an important contribution to the sustainable embedding of these topics.

SZKB considers the measures taken to be appropriate and effective.

Further development and next steps

In 2026, SZKB will further advance sustainability efforts through responsible financing in the following areas:

• Incorporation of external data to improve and supplement SZKB data for calculating emissions associated with the mortgage portfolio, as well as for the scenario calculation (with loss functions, etc.)
• Reviewing climate scoring for corporate client business
• Examining further sustainable financing products and further developing existing sustainable financing products.
• Developing the catalogue of ESG criteria for smooth integration into the financing process; implementing exclusion criteria for sectors of which the main activities include coal mining, oil and gas extraction or the mining of ores