The sustainability-related financial disclosures have been prepared in accordance with SLFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information and SLFRS S2 – Climate-related Disclosures, issued by the Institute of Chartered Accountants of Sri Lanka. These disclosures are designed to provide decision-useful information to primary users about sustainability-related risks and opportunities that could reasonably be expected to affect the Bank’s cash flows, access to finance, or cost of capital over the short, medium, or long term. The disclosures are presented together with the Bank’s audited financial statements to ensure connectivity and consistency.

1.1 Reporting Entity, Organisation Boundary and Value Chain

DFCC Bank PLC Group (“the Bank and its subsidiaries”) is the reporting entity. The disclosures cover the Bank and wherever applicable, covering its subsidiaries (collectively referred to as “the Group”) within the organisational boundary applied for consolidated financial statements. The value chain considered includes upstream and downstream activities that materially influence the Bank’s sustainability-related risks and opportunities, strategy, business operations, and its stakeholders.

1.2 Basis of Materiality

Materiality is assessed based on whether information about sustainability-related risks and opportunities could reasonably influence decisions of primary users of general-purpose financial reports.

The Bank applies a structured financial materiality assessment process considering:

• Quantitative materiality thresholds
• Qualitative factors

Quantitative materiality thresholds:

The Bank considers the following when determining the information that has the potential to be financially material;

• SLFRS Sustainability Disclosure Standards require that an entity disclose additional information when that information is necessary to enable primary users to understand the effects of sustainability-related risks and opportunities on the entity’s cash flows, its access to finance or cost of capital over the short, medium or long-term.
• When making materiality judgements, the Bank considers whether the item of information could reasonably be expected to affect primary users’ assessment of the amount, timing and uncertainty of future net cash inflows to the Bank and their assessment of stewardship of the Bank’s economic resources sufficiently influence their decisions.
• Based on the quantitative analysis performed, the following thresholds are considered to assess the financial materiality of CRROs.

Metrics	Materiality Threshold	Rationale for selection
Gross Income (Bank)	0.5% of gross income	Quantitative materiality thresholds were determined using percentages of gross metrics to ensure transparent assessment of the gross financial impact of climate-related risks and opportunities (CRROs)
Total Assets (Bank)	0.5% of total assets
Cash Flows from Operating Activities	0.5% of cash flow from operating activities

Qualitative factors:

In addition to financial materiality thresholds, the Bank considers both entity-specific and external qualitative factors in determining materiality.

Entity specific qualitative factors
Qualitative factor	Rationale for selection
Nature of the sustainability- related risk or opportunity	SLFRS S1 requires considering the nature of risks that could reasonably influence user decisions. Certain risks/opportunities may be material regardless of magnitude due to inherent characteristics such as transition risk, legal exposure, systemic events, etc.
Dependency of business model and strategy on key resources or relationships	Dependence on relationships, capital providers, ecosystems and stakeholder trust is a core element affecting future cash flows and cost of capital.
Unexpected variations or unexpected changes in trends	Sudden fluctuations such as extreme weather events, market volatility, and regulatory shifts may indicate emerging risks not yet captured quantitatively.
Geographical locations of branches/assets	DFCC maintains branches and customer exposures in climate-vulnerable regions. These geographic exposures can materially affect borrowers’ repayment capacity, asset quality, collateral value and operational continuity.
Reputational risks related to ESG and stakeholder expectations	Reputational impacts can influence financial performance, cost of capital, and customer behavior. As DFCC is deeply committed to being a sustainability-focused bank, any failure to meet ESG expectations or inconsistencies in performance could undermine its credibility and reduce its ability to attract investor funding.
Non-compliance or lag in adapting to evolving regulatory frameworks	Mandatory transition to SLFRS S1 & S2 from 2025, strengthened climate risk management requirements, and ESG linked supervisory expectations mean regulatory non-compliance may result in penalties, higher capital charges, or constraints on operational freedom which directly affect DFCC’s cost of capital and financial prospects.
Matters highly scrutinised by primary users	DFCC relies significantly on international development finance institutions (DFIs), long-term lenders, foreign credit lines and institutional investors who closely evaluate climate risk governance, portfolio climate exposure, sustainable finance performance and risk management maturity. Topics that primary users frequently assess such as DFCC’s climate risk integration, decarbonisation pathway of its lending book, and ESG governance are therefore inherently material.

1.3 Functional Currency

The functional and presentation currency of DFCC Bank PLC and its subsidiaries is Sri Lankan Rupees (LKR). All sustainability-related financial disclosures are presented in LKR, consistent with the financial statements.

1.4 Sources of Guidance

In preparing these disclosures, the Bank referred to local and international applicable reporting standards and frameworks:

• SLFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information
• SLFRS S2 – Climate-related Disclosures
• SASB Standards – Commercial Banks Sustainability Accounting Standard, Version 2023 –12
• Sustainable Finance Roadmap 2.0 issued by Central Bank of Sri Lanka
• Nationally Determined Contributions (NDC 3.0) of Sri Lanka

1.5 Reporting Period

The disclosures cover the financial year starting from 1st January 2025 to 31st December 2025, consistent with the Bank’s audited financial statements.

1.6 Time Horizon

Sustainability-related risks and opportunities are assessed over following time horizons

Description	Time Horizon	Definition
Short term	1 year	Short term refers to the year 2026
Medium term	2 to 3 years	Medium term covers year 2027 and 2028
Long term	Over 3 years	Long term refers to 2029 onwards

These horizons align with the Bank’s strategic planning and risk management frameworks.

1.7 Connected Information

The Bank ensures disclosure of interconnectivity among the different CRROs, and connectivity between sustainability disclosures and financial statements by explaining how sustainability-related risks and opportunities affect financial performance, position, and cash flows. Cross-references are provided to relevant sections of the Annual Report, including Corporate Governance, Strategy, and Integrated Risk Management.

1.8 Transitional Relief

As a first-time adopter of SLFRS S1 and S2, DFCC Bank has applied the transitional relief provisions permitted under this standard. Accordingly, the Bank has elected to the following reliefs.

1.9 Significant Judgements, Uncertainties and Proportionality

The preparation of sustainability-related financial disclosures involves significant judgements in following;

• Identification of CRROs
• Determining materiality of the CRROs
• Defining the time horizons (short, medium and long term) for assessing impacts
• Selecting assumptions for CRRO assessments – assessment of significant changes to the carrying value of the assets and liabilities in the next financial year
• Evaluating data availability and reliability, particularly across the value chain

We understand that there is inherent measurement uncertainty in estimating financial effects of climate-related risks that we identified. These estimates will depend on assumptions regarding future regulatory developments, technological advancements, geographical metric data availability, and market conditions, etc.

The Bank acknowledges that the disclosures made in the initial years of applications will evolve as systems and capabilities improve. Hence, to address the challenges arising from uncertainty, the Bank has applied proportionality principles under SLFRS S1 and S2 such as;

• Use of all reasonable and supportable information that is available for the reporting period
• Apply approaches that are aligned to the Bank’s capabilities and resources
• Continuous improvement of disclosures with data quality and internal process improvements over time

1.10 Statement of Compliance

This report represents a complete set of sustainability-related financial disclosures for DFCC Bank PLC (Group) for the year ended 31 December 2025. The Bank’s sustainability-related disclosures have been prepared in accordance with SLFRS Sustainability Disclosure Standards as issued by The Institute of Chartered Accountants of Sri Lanka.

DFCC Bank’s sustainability governance framework, at both Board and Management levels, provides robust oversight for the pillars of our sustainability strategy. Our comprehensive integrated risk management framework establishes clear structures and accountability for ESG risk governance and execution.

The Bank’s overall ESG Governance structure is as follows:

2.1 Board Oversight Role

The Board of Directors of DFCC Bank plays a pivotal role in shaping the Bank’s strategic direction and ensuring alignment with our long-term objectives. The Board of Directors provides strategic oversight of SRROs that could materially impact DFCC Bank’s business model, financial performance, and long-term resilience. The Board is responsible for guiding the Bank’s strategy, monitoring progress against strategic priorities, and safeguarding value creation for all stakeholders. The Board also ensures robust management of ESG risks. This oversight is exercised through the Board Integrated Risk Management Committee (BIRMC), ensuring connectivity between sustainability governance and integrated risk management.

The roles and responsibilities of the governing body are provided below:

Board of Directors

Board Integrated Risk Management Committee (BIRMC)

Provide strategic direction and oversee the integration of ESG considerations into the Bank’s business strategy, overall risk management and strategic decision-making for all significant corporate actions. Review and approve the Bank’s ESG Strategy and policies presented by the Executive Sustainability Management Committee (ESMC) through BIRMC. Ensure that sustainability is integrated into the Bank’s business model, culture, and operations. Oversee the ongoing measurement and reporting of performance against established key ESG metrics and targets established for the Bank. Ensure alignment of the Bank’s ESG targets with the Bank’s overall strategic direction and risk appetite. Ensure the availability or development of appropriate skills and competencies to oversee strategies designed to respond to SRROs

ESG Strategy Oversight: Guide the development of the Bank’s ESG strategy, advise the Board, and recommend for approval by the Board. Implementation & Governance: Oversee execution of the ESG strategy, approve related projects, and review the effectiveness of governance, teams, and processes. Risk & Opportunity Management: Ensure the Board is informed of the SRROs and CRROs based on the materiality of the issues and their impact on strategy, transactions, and risk management. Advise the Board on the Bank’s appetite and tolerance with respect to ESG. Identify material ESG-related risks and ensure that these are appropriately captured in the Bank’s risk profile and integrated risk management framework. Review and provide guidance on management’s role to monitor, manage and oversee SRROs and CRROs. ESG Metrics & Performance: Review and approve key ESG metrics and targets and monitor performance and reporting against these benchmarks. Reporting & Disclosures: Review ESG-related reports before Board approval, ensuring accuracy and completeness of external disclosures. Facilitate continuous improvement in the Bank's non-financial reporting / sustainability disclosures and performance Policy & Conduct: Monitor ESG-related policies, codes of conduct, and incident reporting procedures, ensuring their relevance and effectiveness. Resourcing & Assurance: Recommend ESG-related funding and resources, oversee their deployment, and review external assurance processes for non-financial disclosure

The Board is informed quarterly through reports from the ESMC and BIRMC on sustainability related matters including SRROs and progress against sustainability related KPIs. Further, updates on regulatory changes and disclosure requirements are also informed to the Board through BIRMC.

The Board addresses SRROs by embedding sustainability considerations into strategic decision making, approving mitigation plans for climate related risks and transition strategies, and allocating resources for sustainability initiatives and capacity building.

Monitoring is achieved through quarterly reviews of sustainability KPIs, oversight of compliance with SLFRS S1 and S2 disclosure requirements and obtaining independent assurance on sustainability disclosures to ensure transparency and accuracy.

Skills and competencies of the Board

The Board collectively possesses expertise in banking, finance, business and management, risk management, ESG principles, etc. We have conducted a questionnaire-based survey to assess the Board’s awareness on SLFRS sustainability reporting disclosures. Accordingly, identifying the gaps, continuous capacity-building programmes and external advisory support have been obtained during the year to strengthen the Board’s competencies in sustainability governance. During the year, the Board has participated in the following sustainability financial disclosures related training and awareness sessions:

Programme description	Number of Board members attended
Sustainability Reporting and the Implementation of SLFRS S1 & S2: The session included; Evolution of ESG/Sustainability, An Introduction to SLFRS Sustainability Disclosure Standards, Adoption of SLFRS Sustainability Disclosure Standards, Governance related Disclosure Requirements.	09
Workshop on Board’s Role in Mandatory Sustainability Reporting	02

2.2 Management Role

The Board delegated operational responsibility for managing sustainability matters including SRROs to the Executive Sustainability Management Committee (ESMC), chaired by the CEO and supported by cross functional teams. ESMC meets every six weeks to provide actionable feedback to ensure continued progress. The findings and reports on the lending activities as per the Environmental and Social Risk Management System (ESMS) of the Bank are regularly reported to the ESMC, Credit Committee and the Assets & Liability Committee (ALCO). While the Credit Committee follows a structured reporting line to the Board, any emerging risks requiring immediate attention are promptly escalated to the BIRMC, to ensure proactive decision making.

The roles and responsibilities of the key sustainability governance management committees are provided below:

Executive Sustainability Management Committee (ESMC)

Credit Committee

Strategic Direction Guide the implementation of the DFCC Sustainability Strategy Ensure sustainability is integrated into corporate strategy and business planning Governance and Oversight Provide oversight of SRROs including CRROs and any other upcoming areas such as biodiversity and human rights Oversee the work of the Core Working Group – Sustainability Management Committee (SMC) and the Sustainability Sub Committees Recommend to the Board any sustainability related KPIs, policies, strategic changes, etc. Operational Review and approve the sustainability work plan Drive cross functional collaboration to meet ESG targets Monitoring and Reporting Monitor progress of the sub committees Monitor Progress of the Corporate Social Responsibility/sustainability initiatives Facilitate for ESG disclosures to fulfill compliance requirements and alignment with applicable standards Monitor the sustainability performance, progress towards ESG targets, risks and present updates to the BIRMC and Board quarterly, through the formal reporting channels

Guide the implementation of the Bank’s Environmental and Social Management System (ESMS) Ensure ESG criteria are integrated into credit evaluations and decision making Review and sanction credit proposals as per the Delegation of Lending Authority, whilst ensuring adherence to Bank’s lending policies and guidelines Promote and prioritise environmentally and socially responsible projects in credit Monitor progress of the environmental and social (E&S) risk management function of credit facilities, carried out by the Sustainability Department

The Management implements Board approved policies related to sustainability including; ESG policy, ESG Risk Policy, IRM framework, Credit Policy, Procurement Policy, DFCC’s Exclusion List, Anti Money Laundering Policy, Whistleblower Policy, Employee Health and Safety Policy, Environmental and Social Management Framework etc.

DFCC Bank’s sustainability strategy is anchored in an understanding that climate-related issues increasingly shape the Bank’s business environment, stakeholder expectations, and the resilience of its portfolio. As part of its adoption of SLFRS S1 and S2, DFCC Bank has strengthened its approach to identifying, assessing, and managing climate-related risks and opportunities that may influence long-term strategic resilience. In line with these standards, the Bank evaluates climate-related matters through the lenses of transition risks, physical risks, and emerging opportunities arising from the low-carbon shift.

For the reporting period, DFCC Bank has prioritised two climate-related risks (CRR) and one opportunity (CRO);

CRR 1 – Extreme Weather Events

CRR 2 – Exposure to carbon-intensive sectors without adequate transition planning or financed emission tracking

CRO 1 – Sustainable Financing

These strategic impacts guide how the Bank allocates capital, develops products, and steers its long-term sustainability agenda.

3.1 Strategy Disclosures on Climate-related Risks

CRR 1 – Extreme Weather Events
Impact on prospects	Description	Increased frequency and severity of climate-induced extreme weather events such as floods, droughts, storms, high winds, and related health risks.
	Physical Risk or Transition Risk	Physical Risk
	Time horizon	Short, Medium and Long Term
	Define time horizon	Please refer to “1.6 Time Horizons” under “Basis of Preparation” of this section.
Business Model and Value Chain	Current effects on business model and value chain	Sri Lanka witnessed a major extreme weather event in 2025 in the form of Cyclone Ditwah which resulted in major property damage, business disruptions and loss of lives. Events of this nature results in operational disruptions through loss of accessibility to business premises, travel and transport difficulties and breakdown of power and communications infrastructure. Customers of the Bank who have had their businesses operations disrupted and properties damaged will request the Bank for concessions on loan repayments thereby impacting cashflows and additional operational overheads in terms of granting concessions. The value of collaterals mortgaged to the Bank and the quality of advances can also be impacted due to property damage, loss of supply chain, production capacity and market demand, and can be both temporary and permanent. Please refer Table A below which outlines the known or observable impacts on financial position, performance, and cash flows during the reporting period ended 31 December 2025.
	Anticipated effects on business model and value chain	Potential higher impairment charges – Impairment of asset quality and collateral value in climate-vulnerable sectors such as agriculture, fisheries, power generation, property development, tourism and manufacturing or businesses located in climate sensitive areas. Increased credit loss risk – Increased credit loss risk due to higher probability of borrower defaults arising from disruptions to borrower business operations in climate risk sensitive regions, and the need to compensate through higher margins. Increased cost of insurance or non-availability of insurance against natural perils. Avoidance of exposure into high-risk industries, regions or collateral and the resulting loss of revenue and profit.
	Where it is concentrated	Credit Risk – Borrowers in climate vulnerable regions may face income disruptions due to extreme weather events which may cause an increase in default risk and weaken asset quality. Market Risk – Fluctuation of asset values due to extreme weather events in climate vulnerable sectors such as agriculture, real estate etc. may affect portfolio stability and returns on investments. Liquidity Risk – Sudden extreme weather events may reduce the liquidity of affected assets limiting the ability to recover funds or meet short term obligations. Operational Risk – Disruptions to branch operations due to branch closures, IT system downtimes and service delivery issues caused by extreme weather events may impact business continuity and customer service.
		Reputational Risk – Failure to respond to climate impacts and support affected clients, communities and staff may harm the stakeholder trust and public image and goodwill of the bank. Loan portfolio mix – Exposure to climate sensitive geographical areas and industries may lead to cautious lending, specifically in sectors such as agriculture, fisheries etc. due to higher risks and lower collateral values.
Strategy and Decision Making	Plans to respond to in Strategy, Risk Management, Transition Plans and Climate-related Targets	Adaptation actions: Enhanced due diligence in financing climate sensitive economic sectors, increased scrutiny of collaterals located in climate sensitive areas such as agriculture, tourism and hospitality, construction, transportation, real estate and mortgages in flood, drought and landslide prone areas etc. Geographic risk mapping to support integration of physical climate risks into sectoral and regional credit assessments. Evaluate insurance and credit guarantee options, portfolio diversification, support climate change mitigation and adaptation objectives of customers. Green finance targets to actively increase financing toward environmentally sustainable projects and sectors thereby mitigating climate-related risks and enabling clients to transition to low-carbon operations. Strengthening digital banking platforms and IT systems to reduce the impact on operational disruptions from extreme weather events.
	How the Company is Resourcing and Plan to Resource Activities	Financial Investment: Allocation of a specific budget for climate-related risk mitigation and Adaptation – The Bank has set for itself a target of achieving a sustainable finance portfolio of LKR 100 Bn by 2030, which would be approximately 10% of the Bank’s lending book by then. These green financing activities include climate change mitigation and adaptation actions which would support our customers better manage the impacts of extreme weather events. Sustainable Financing instruments – In order to catalyse financial markets towards financing sustainable investments, the Bank pioneered green deposits (2023) green bonds (2024), blue bonds (2025) and GSS+ bonds (2026). Funds raised through these issuances are eligible for usage towards qualifying investments in climate adaptation measures which supports our customers better manage the impacts of extreme weather events. Capital Expenditure on Climate Resilient Infrastructure – Recognising the potential impacts extreme weather events can have on the operations of the Bank, investments have been made to ensure sufficient redundancy and capacity measures in our infrastructure to manage the disruptions that maybe caused by extreme weather events as part of our Business Continuity Planning (BCP) protocol. These include redundant communication links and data centers, alternate work locations, backup staffing arrangements and investments in digital banking products (online banking and app based banking) that minimises service quality disruptions arising from extreme weather events.
		Human Capital Development: Training and development – The Bank has a serious emphasis on updating and upskilling the knowledge level of our staff on climate and sustainability related matters. The Bank regularly carries out internal training, procedure framework development and capacity building for staff to manage operations with minimal disruptions in the event of a major operational disruption caused by extreme weather events. These steps are well documented in our BCP plan including the staffing arrangements, alternate work locations, minimum throughput levels, time to new normalcy etc. Hiring experts – The Bank recognises the need to stay abreast with the latest practices and standards related to business continuity in the face of extreme weather events. Accordingly, the Bank regularly engages with external subject matter experts to guide and build capacity of internal staff and to keep the BCP procedures updated and relevant. Cross-functional teams – The Bank understands the value of teamwork and recognises that most functions related to operational continuity under extreme weather conditions require the involvement of more than one department. Accordingly, cross functional teams have been established to operationalise and monitor the operations during business disruptions.
		Technology integration Data analytics and modeling tools (climate databases and models) – with the increasing emphasis on climate related risks on our lending portfolio, the Bank now accesses natural disaster maps to identify risks associated with business premises and collaterals from a climate risk perspective. Engagement with industry groups – The Bank maintains memberships and close ties with many industry bodies, in Banking and Finance and in Sustainable financing and development as well as in fintech, disaster recovery technology and various other coalitions. These include, Sri Lanka Banks Association (SLBA) and its sub-bodies such as the Sustainable Banking Initiative (SLBA-SBI). A comprehensive list of memberships held by the Bank can be found in Social and Relationship Capital (Pages 120-136) of this report.
		Stakeholder engagement Customer feedback mechanisms – As a progressive organisation, we appreciate feedback from our valued customers which enables us to understand their requirements and serve them even better. The Bank has a dedicated customer hotline, email and postal addresses, a chatbot, secure messaging services through online banking, DFCC One and DFCC iConnect, periodic customer satisfaction (CSAT) surveys, all with the aim of maintaining a constructive dialogue with our customers and the general public. Through these channels we both obtain information and requests from customers about the support and relief needed in the face of adverse weather events, and communicate to our customers and other stakeholders operational arrangements (such as alternate channels availability, modified operating hours and operational disruptions) during times of extreme weather events as well. Investor relations – As a Public Limited Company listed in the Colombo Stock Exchange, the Bank adheres to all the reporting requirements of the CSE and SEC, Central Bank of Sri Lanka (CBSL) and the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka). Such reporting includes this Integrated annual report, quarterly financial reports, press releases, announcements made to the CSE on important decisions taken by the Bank, a multi-language website, mass media and social media presence and an investor relations contact point within the Bank.
		Continuous monitoring and evaluation Performance metrics – Performance metrics have been established to provide strategic guidance as well as performance measurement tools related to sustainability related activities of the Bank. These are both long term (decarbonisation related) and short term (operational and support activities). Regular reviews – The Bank has established a formal mechanism for regularly reviewing the progress of sustainable financing, Business Continuity Planning and peripheral activities, with progress reports being submitted to several authorities such as the Executive Sustainability Management Committee (ESMC), Credit Committee (CC) and the Board Integrated Risk Management Committee (BIRMC).
	Progress	Financial Investment: During the year the Bank allocated a specific budget to achieve through annual sustainable financing target. Please refer to the Natural Capital section (pages 137-159) for more details. In addition, the Bank has made specific investments in improving its operational resilience through upgrading the BCP methodology, human resource capacity required to manage operations during disruptions and investments in information technology and alternate banking channels to ensure continued customer service despite climate related disruptions. Human Capital Development: During the year, the Bank conducted 16 awareness sessions and workshops for staff on Sustainability and ESG-related topics. For further details, please refer to the Natural Capital section (pages 137-159). External consultancy was obtained for capacity building on implementation of SLFRS S1 & S2. In addition, the Bank recruited an Environmental & Social (E&S) Risk Officer to strengthen focused oversight on environmental matters, promote sustainable practices among customers, and monitor the progress and implementation of the Environmental and Social Management System (ESMS). Stakeholder Engagement: The Bank conducted a stakeholder engagement survey and a materiality assessment during the year. Please refer to Our Commitment to Stakeholder (pages 50-57) and Materiality (pages 58-65) of this report. Continuous Monitoring and Evaluation: The Bank reported to the ESMC every six weeks, completing eight meetings during the year. Quarterly updates were also provided to the BIRMC. In addition, the Sustainability Department submitted three papers to the CC, four papers to ALCO, and several submissions to the Board on climate-related matters, including green financing, renewable energy initiatives, climate related disclosures for the Annual Report, E&S risk evaluations, and broader sustainability performance. Our Business Continuity Plans are also regularly reviewed, both internally and externally, updated, and are now subject to full suite of compliance audits as well.
Financial Effects	Current year financial effects to PL, BS and CF	Refer Table A below which outlines the known or observable impacts on financial position, performance, and cash flows during the reporting period ended 31 December 2025.
	Significant risk of material adjustments to carrying value of assets and liabilities in the next financial year	Based on the Bank’s current evaluation of climate-related risks and opportunities, there is a material adjustment for the expected interest income loss risk as a result of adjustment on concessions and moratorium impact from Cyclone Ditwah amounting to LKR 199 Mn. In addition to that, potential higher impairment charges of climate-vulnerable sectors, increased cost of insurance, strategic avoidance of exposure into high-risk industries, regions and collateral which may result in loss of revenue will continue to be monitored due to their potential proximity to materiality thresholds.
	Anticipated financial effect over short, medium and long term to PL, BS and CF	This will be quantified as of 31 December 2027, making use of the transitional relief provided in the standard. Please refer to “1.8. Transitional Relief” under Basis of Preparation of this section.
Climate Resilience	Resilience Assessment	This will be performed as of 31 December 2027 making use of the transitional relief provided in the standard. Please refer to “1.8. Transitional Relief” under Basis of Preparation of this section.
	How and When Climate Scenario Analysis was performed. Disclosure of (i) Inputs; (ii) Key Assumptions, and (iii) Reporting period in which scenario analysis was carried out	This will be performed as of 31 December 2027, making use of the transitional relief provided in the standard. Please refer to “1.8. Transitional Relief” under Basis of Preparation of this section.
Judgements and Uncertainties	Judgements	Refer Table B on judgements that the bank has made in the process of financial quantification of the identified CRROs.
	Uncertainties	Refer Table C on the uncertainties which may affect the amounts being reported, assumptions and approximations the bank has made in quantifying financial impacts of the identified CRROs.

CRR 2 – Exposure to carbon-intensive sectors without adequate transition planning or financed emission tracking
CRRO 2 – Impact on Prospects	Description	Credit and market risks due to exposure to carbon-intensive sectors, lack of readiness in managing financed emissions, and transition planning of the portfolio. Some economic sectors financed by the Bank may face regulatory penalties or business model disruption, creating knock-on effects on our lending portfolio.
	Physical Risk or Transition Risk	Transition Risk
	Time horizon	Medium to Long-term
	Define time horizon	Please refer to “1.6 Time Horizons” under “Basis of Preparation” of this section.
Business Model and Value Chain	Current effects on business model and value chain	During the year under review, the Bank did not witness any material and observable impacts on its operations, portfolio quality or cashflows as a direct result of either our own operations or our customers being impacted due to lack of transition planning in carbon intensive areas. Please refer Table A below which outlines the known or observable impacts on financial position, performance, and cash flows during the reporting period ended 31 December 2025.
	Anticipated effects on business model and value chain	Risk of Orphaned Industries – High carbon intensive industries operating without a transition plan may find themselves unable to continue their operations due to non-compliance with increasingly stricter pollution control and resource conservation measures. This leads to increased credit risk from clients in carbon intensive sectors. Premature demise of businesses – with the rapid evolution of technologies and increasingly environmentally conscious customer base, industries who do not evolve with newer consumer preferences, which also includes environmentally friendly business practices – could find the appeal for their products dwindle. Loss of credit portfolio – As carbon heavy industries go out of business, the Bank stands to lose a portion of its credit portfolio which was lent to such industries. Also, with the decarbonatisation objectives of the Bank, the Bank may voluntarily withdraw funding from high carbon industries thereby necessitating investments into new economic segments and eco-friendly clients to maintain revenue and profitability. Income loss from climate negative industries – in connection to the above loss of credit portfolio, the Bank will also lose out on interest income and fee-based income earned from such industries. Lower credit ratings/increased funding costs on climate negative exposures – With carbon exposures being increasingly seen as negatives within the portfolio mix both from an exposure and a risk perspective, rating agencies and financiers may take a negative view of the portfolio resulting in weaker credit ratings and higher funding costs. Negative social impacts of association with climate negative industries – Association with climate negative industries is increasingly met with negative connotations, which may also impact financiers of such projects. Global perception of trading in certain industries – greater exposure to policy and market shifts affecting transition of lagging sectors. Risk of asset devaluation, with greater impairments associated with high carbon exposures, the Bank risks higher provisioning and lower asset values.
	Where it is concentrated	Credit Risk – Increased likelihood of borrower default due to operational difficulties faced by carbon intensive sectors affecting asset quality and loan recoverability. Underwriting Risk – Inadequate assessment of transition risks during loan origination may lead to elevated risk exposure. Market Risk – Volatility in carbon intensive industries may impact asset valuations. Liquidity Risk – Reduced marketability of assets linked to the high emitting sectors may impact liquidity specifically during the climate stressed periods.
		Operational Risk – Gaps in tools to assess financed emissions can lead to process inefficiencies and compliance issues. Reputational Risk – Continued financing to carbon intensive sectors without transition planning may lead to negative stakeholder attention and harm the bank’s sustainability credentials. Loan portfolio mix – Geographic and sectoral concentration in carbon intensive industries may limit lending flexibility due to higher provisioning needs and lower collateral values.
Strategy and Decision Making	Plans to respond to in Strategy, Risk Management, Transition Plans and Climate-related Targets	Increase the share of green and sustainable finance annually. DFCC became signatory to Partnership in Carbon Accounting Financials (PCAF) from April 2025 onwards to strengthen financed emission tracking. DFCC became a member of United Nations Global Compact (UNGC) in December 2025 and is now committed to the UNGC Ten Principles, 3 of which are specifically about environmentally friendly practices (refer to pages 80-83 of this report). The Bank is in the process of developing a net-zero roadmap with sector-level transition strategies in line with becoming net-zero by 2050. Mobilising capital towards sustainability investments by developing the necessary frameworks and raising funds through Blue, Green and GSS+ bonds. Enhanced ESG due diligence and screening for new lending and investment decisions to address climate risks. To conduct climate stress testing for carbon-intensive clients and sectors. To set measurable targets to reduce financed emissions intensity across the portfolio pursuant to financed emissions computation. Engage with carbon-intensive clients to support their transition pathways through advisory services and tailored financial products.
	How the Company is Resourcing and Plan to Resource Activities	Financial Investment: Allocation of a specific budget for climate-related risk mitigation and adaptation – The Bank has set for itself a target of achieving a sustainable finance portfolio of LKR 100 Bn. by 2030, which would be approximately 10% of the Bank’s lending book by then. While fully endorsing and supporting national level transition plans towards decarbonisation, this funding pays significant emphasis on supporting our customers to implement their specific decarbonisation plans and to improve resource efficiency. Sustainable Financing instruments – In order to catalyse financial markets towards financing sustainable investments, the Bank pioneered green deposits (2023) green bonds (2024), blue bonds (2025) and GSS+ bonds (2026). Funding raised from these instruments can support our customers to adopt eligible decarbonisation and resource efficiency measures. Development of a Net-Zero by 2050 roadmap – the Bank, under its sustainability strategy 2020-2030 has undertaken to develop a comprehensive net-zero roadmap so that the institution is net-zero by 2050 in line with the national net-zero goal. The Bank is committed to make the necessary investments to meet this objective as per the milestones developed in this plan.
		Human Capital Development: Training and development – The Bank is currently in the process of developing its own decarbonisation plan to become net-zero by 2050 alongside the national objectives. Accordingly, the Bank carries out internal training programs on resource efficiency, energy monitoring and carbon computations and decarbonisation pathways so that this knowledge can both be used inhouse for our own decarbonisation journey, as well as to advise, guide and identify opportunities for decarbonisation and resource efficiency within our clients. Hiring experts – The Bank recognises the need to stay abreast with the latest reporting standards related to sustainability and carbon emissions, as well as to have industry-leading internal frameworks and strategic plans to facilitate our green journey. Accordingly, the Bank regularly engages with external subject matter experts to guide and build capacity of internal staff. Cross-functional teams – The Bank understands the value of teamwork and recognises that most functions related to sustainability and the net-zero journey require the involvement of more than one department. Accordingly, several cross functional teams have been established to conceptualise, implement, accelerate and monitor the progress of various sustainability and decarbonisation initiatives at the Bank. Technology integration: Data analytics and modeling tools (climate databases and models) – with the increasing emphasis on transition related risks on our lending portfolio, the Bank now accesses industry level classification data to identify carbon intensive industries from a transition risk perspective. Engagement with industry groups – The Bank maintains memberships and close ties with many industry bodies, in Banking and Finance and in Sustainable financing and development sphere. These includes, Sri Lanka Banks Association (SLBA) and its sub-bodies such as the Sustainable Banking Initiative (SLBA-SBI), Association of Development Financing Institutions in Asia and Pacific (ADFIAP), PCAF, UNGC and many others to support our decarbonisation and resource efficiency drive. A comprehensive list of memberships held by the Bank can be found in of this report. Academic partnerships for research – The Bank regularly makes itself available for knowledge interchange purposes, frequently participating and speaking at various forums, presentation sessions, panel discussions and sharing our experiences with a wider audience. The Bank is regularly contacted by researchers and academia for industry insights into sustainable financing activities and capacity building for university students and the Bank is pleased to take part in such events. Stakeholder engagement: Customer feedback mechanisms – As a progressive organisation, we appreciate feedback and suggestions from our valued customers which enables us to understand their expectations from us in terms of how the Bank can contribute towards their own decarbonisation and resource conservation journeys. The Bank has a dedicated customer hotline, email and postal addresses, a chatbot, secure messaging services through online banking, DFCC One and DFCC iConnect, periodic customer satisfaction (CSAT) surveys, all with the aim of maintaining a constructive dialogue with our customers and the general public. In addition to the external stakeholders, there are internal channels and continuous improvement (kaizen) systems in place that can generate ideas from internal stakeholders that would support our net-zero journey.
		Investor relations – As a Public Limited Company listed in the Colombo Stock Exchange, the Bank adheres to all the reporting requirements of the CSE and SEC, Central Bank of Sri Lanka (CBSL) and the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka). Such reporting includes this Integrated annual report, quarterly financial reports, press releases, announcements made to the CSE on important decisions taken by the Bank, a multi-language website, mass media and social media presence and an investor relations contact point within the Bank. Continuous monitoring and evaluation: Performance metrics – Performance metrics have been established to provide strategic guidance as well as performance measurement tools related to sustainability related activities of the Bank. These are both long term (decarbonisation related) and short term (operational and support activities). Regular reviews – The Bank has established a formal mechanism for regularly reviewing the progress of sustainable financing, resource efficiency and peripheral activities, with progress reports being submitted to several authorities such as the Executive Sustainability Management Committee (ESMC), Credit Committee (CC) and the Board Integrated Risk Management Committee (BIRMC).
	Progress	Financial Investment: During the year the Bank allocated a specific budget to achieve through annual sustainable financing target. Please refer to the Natural Capital section (Pages 137-159) for more details. This Sri Lanka Green Finance taxonomy aligned financing component includes eligible investments into decarbonisation and resource efficiency as well. Human Capital Development: During the year, the Bank conducted 16 awareness sessions and workshops for staff on Sustainability and ESG-related topics. For further details, please refer to the Natural Capital section (Pages 137-159). External consultancy was obtained for capacity building on implementation of SLFRS S1 & S2. In addition, the Bank recruited an Environmental & Social (E&S) Risk Officer to strengthen focused oversight on environmental matters, promote sustainable practices among customers, and monitor the progress and implementation of the Environmental and Social Management System (ESMS). During the year, the Bank formed Sustainability Management Committee (SMC), a second level management committee to the ESMC for implementation of SLFRS S1 & S2 and monitor ESG themed KPIs aligned with the strategy. Stakeholder Engagement: The Bank conducted a stakeholder engagement survey and a materiality assessment during the year. Please refer to Our Commitment To Stakeholder (Pages 50-57) and Materiality (Pages 58-65) of this report. Continuous Monitoring and Evaluation: The Bank reported to the ESMC every six weeks, completing eight meetings during the year. Quarterly updates were also provided to the BIRMC. In addition, the Sustainability Department submitted three papers to the CC, four papers to ALCO, and several submissions to the Board on climate-related matters, including green financing, renewable energy initiatives, climate related disclosures for the Annual Report, E&S risk evaluations, and broader sustainability performance.
Financial Effects	Current year financial effects to PL, BS and CF	Refer Table A below which outlines the known or observable impacts on financial position, performance, and cash flows during the reporting period ended 31 December 2025.
	Significant risk of material adjustments to carrying value of assets and liabilities in the next financial year	Based on the Bank’s current evaluation of climate-related risks and opportunities, there is a material adjustment from to the expected interest income from carbon intensive sector clients amounting to LKR 11,875 Mn. In addition to that, potential risk of orphaned industries and increased credit risk from clients in carbon intensive sectors will continue to be monitored due to their potential proximity to materiality thresholds.
	Anticipated financial effect over short, medium and long term to PL, BS and CF	This will be quantified as of 31 December 2027, making use of the transitional relief provided in the standard. Please refer to “1.8 Transitional Relief” under Basis of Preparation of this section.
Climate Resilience	Resilience Assessment	This will be performed as of 31 December 2027, making use of the transitional relief provided in the standard. Please refer to “1.8 Transitional Relief” under Basis of Preparation of this section.
	How and When Climate Scenario Analysis was performed. Disclosure of (i) Inputs; (ii) Key Assumptions, and (iii) Reporting period in which scenario analysis was carried out	This will be performed as of 31 December2027, making use of the transitional relief provided in the standard. Please refer to “1.8 Transitional Relief” under Basis of Preparation of this section.
Judgements and Uncertainties	Judgments	Refer Table B on judgements that the bank has made in the process of financial quantification of the identified CRROs.
	Uncertainties	Refer Table C on the uncertainties which may affect the amounts being reporting, assumptions and approximations the bank has made in quantifying financial impacts of the identified CRRO.

3.2. Strategy Disclosures on Climate-related Opportunities

CRO 3 – Sustainable Financing
Sustainable Financing – Impact on Prospects	Description	Financing activities that support climate change mitigation, adaptation, and resilience. This includes investments in renewable energy, green buildings, climate-smart agriculture, energy efficiency, climate-resilient infrastructure and other decarbonisation efforts. It also covers capital raising through sustainable finance instruments such as green, social, and sustainable bonds, introducing sustainable financing products such as green deposits and solar loans.
	Physical Risk or Transition Risk	N/A
	Time horizon	Short, Medium and Long Term
	Define time horizon	Please refer to “1.6 Time Horizons” under “Basis of Preparation” of this section.
Business Model and Value Chain	Current effects on business model and value chain	Business Model Diversification: DFCC Bank is expanding its product portfolio through sustainable financing solutions, attracting environmentally conscious clients and investors. This diversification strengthens revenue streams and enhances the Bank’s positioning as a market leader in green and sustainable finance. The Bank is actively financing renewable energy projects, reflecting strong market demand and strategic focus. Also, the Bank is actively seeking opportunities for financing sectors and projects that enable low carbon transitions and climate adaptation particularly in agriculture, energy and water management etc. Increased Customer Loyalty and Trust: By offering products that align with environmental values, the Bank fosters deeper relationships with customers who prioritise sustainability. This alignment builds trust and loyalty, contributing to long-term client retention and brand affinity. Regulatory Compliance and Competitive Advantage: Proactive engagement in sustainable financing enables the Bank to stay ahead of evolving regulatory requirements related to climate risk and ESG disclosures. This not only reduces legal and reputational risks but also provides a strategic edge in a competitive financial landscape. Operational Efficiency and Innovation: The Bank’s focus on sustainable finance drives innovation in product development and digital platforms, such as tools for green investment tracking and environmental impact analysis. These advancements improve operational efficiency and support data-driven decision making. Positive Impact on Reputation: Bank’s commitment to sustainable financing enhances its reputation as a responsible and forward-thinking financial institution. This reputational strength attracts positive stakeholder attention and new partnership opportunities. Access to International Green Credit Lines: The Bank leverages funding from development partners such as the Green Climate Fund (GCF), World Bank, ADB, Symbiotics to expand its green lending capacity and offer concessional financing. Alignment with Global Sustainability Goals: By participating in sustainable financing initiatives, bank contributes to global efforts to combat climate change and promote sustainable development, aligning their operations with international frameworks such as United Nations Sustainable Development Goals (SDGs).
	Anticipated effects on business model and value chain	Expansion of lending and investment opportunities in climate-aligned sectors – The Bank will continue to expand its climate change mitigation and adaptation funding activities in line with the Sri Lanka Green Finance Taxonomy (SLGFT) and actively promote its products and services towards clients who are engaged in industry sectors compliant with the SLGFT. Increased credit demand from climate negative industries for investing in decarbonisation – High carbon industries, facing pressure from export markets, local regulators and in the face of volatile supply chains, are investing in decarbonisation programs which provides an opportunity for the Bank to increase its loan portfolio.
		Enhanced Bank reputation and differentiation as a sustainability-focused financial institution – As a pioneering institution in environmentally friendly financing, the Bank is well recognised globally as a trailblazer in climate financing in Sri Lanka, well demonstrated by becoming Sri Lanka’s first (and so far only) private sector institution to achieve accreditation from the Green Climate Fund (GCF). Increased access to concessional, blended, and international climate finance. – As the climate friendly financing portfolio of the Bank grows, there will be increased interest from activist investors who are engaged in climate investments to contribute towards the activities of the Bank through deposits, subscription to debt instruments and equity investments. Stronger regulatory alignment and preparedness for climate-related disclosure mandates. – By ensuring an early start in terms of green financing, fund raising and climate reporting, the Bank is well poised to meet upcoming regulatory requirements pertaining to disclosure requirements. Improvedlong-term asset quality and portfolio resilience through strategic diversification into sustainable investments. – By distributing and diversifying its credit portfolio into more environmentally friendly economic segments the Bank is improving its long term asset quality through gradually de-risking its climate and carbon exposures.
	Where it is concentrated	Credit Risk – Sustainable financing allows the Bank to diversify credit exposure by supporting low-risk, future ready sectors such as renewable energy. Market Risk – Growing investor demand for green and sustainable investment products helps to develop market-responsive products and attract sustainability focused capital. Liquidity Risk – Access to concessional funding and green/ESG focused credit lines from development partners improves liquidity and strengthens the Bank’s ability to invest/support in sustainable projects. Operational Risk – Enhance systems, data analysis as a result of integration of sustainability impact in operational efficiency. Reputational Risk – Proactive leadership in sustainable finance strengthens DFCC Brand as a responsible financial institute improving stakeholder confidence and public trust.
Strategy and Decision Making	Plans to respond to in Strategy, Risk Management, Transition Plans and Climate-related Targets	Mitigation actions Expand green and blue financing instruments – Continue issuing thematic bonds (e.g. Green and Blue Bonds) to mobilise capital for renewable energy, marine conservation, and climate-resilient infrastructure. Implement product innovation for sustainable lending – This includes climate smart products, financial solutions and digital platforms, enabling the Bank to meet evolving market demands. Embed ESG criteria into credit evaluation – Strengthen environmental and social risk assessments in lending decisions to ensure financed projects meet sustainability standards. Leverage GCF accreditation – Targeted programmes for identified sectors to enhance climate resilience using GCF backed funding. Support SMEs and sectors in Green Transition – Provide concessional financing, awareness and technical support to assist and empower SMEs who adopt sustainable practices and technologies.
	How the Company is Resourcing and Plan to Resource Activities	Financial Investment: Allocation of a specific budget for climate – related risk mitigation and Adaptation – The Bank has set for itself a target of achieving a sustainable finance portfolio of LKR 100 Bn. by 2030, which would be approximately 10% of the Bank’s lending book by then. Based on market demand, a major share of this would be invested in emerging climate financing opportunities. Sustainable Financing instruments – In order to catalyse financial markets towards financing sustainable investments, the Bank pioneered green deposits (2023) green bonds (2024), blue bonds (2025) and GSS+ bonds (2026). One objective of the issuance of such instruments is to finance the demand for climate financing. Human Capital Development: Training and development – The Bank has a serious emphasis on updating and upskilling the knowledge level of our staff on climate and sustainability related matters. The Bank regularly carries out internal training programs to our staff on the identification, analysis and appraisal, financial structuring, risk mitigation and monitoring and follow up on climate investment projects. In addition, the Bank participates in many industry associations, partner with international bodies, and our staff takes part in many external trainings related to climate financing on a regular basis. Accordingly, the Bank regularly engages with external subject matter experts to guide and build capacity of internal staff. Cross-functional teams – The Bank understands the value of teamwork and recognises that most functions related to sustainable financing require the involvement of more than one department. Accordingly, many departments of the Bank covering areas such as corporate and SME lending, consumer financing, integrated risk management, Treasury, Sustainability and marketing work closely on the development of climate financing products and promotion of financing for green initiatives and resource conservation measures.
	How the Company is Resourcing and Plan to Resource Activities (Cont'd)	Technology integration: Engagement with industry groups – The Bank maintains memberships and close ties with many industry bodies, in Banking and Finance and in Sustainable financing and development as well as in fintech, disaster recovery technology and various other coalitions. These includes, Sri Lanka Banks Association (SLBA) and its sub-bodies such as the Sustainable Banking Initiative (SLBA-SBI), Association of Development Financing Institutions in Asia and Pacific (ADFIAP) and many others. A comprehensive list of memberships held by the Bank can be found in Social and Relationship Capital (Pages 120-136) of this report. Academic partnerships for research – The Bank regularly makes itself available for knowledge interchange purposes, frequently participating and speaking at various forums, presentation sessions, panel discussions and sharing our experiences with a wider audience. The Bank is regularly contacted by researchers and academia for industry insights into sustainable financing activities and capacity building for university students and the Bank is pleased to take part in such events.
		Stakeholder engagement: Customer feedback mechanisms – As a progressive organisation, we appreciate feedback from our valued customers which enables us to maintain a dialogue with our customers and the general public alike, on climate financing instruments available with the Bank to meet their specific requirements and to provide customised solutions. The Bank has a dedicated customer hotline, email and postal addresses, a chatbot, secure messaging services through online banking, DFCC One and DFCC iConnect, periodic customer satisfaction (CSAT) surveys, all with the aim of maintaining a constructive dialogue with our customers and the general public. Investor relations – As a Public Limited Company listed in the Colombo Stock Exchange, the Bank adheres to all the reporting requirements of the CSE and SEC, Central Bank of Sri Lanka (CBSL) and the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka). Such reporting includes this Integrated annual report, quarterly financial reports, press releases, announcements made to the CSE on important decisions taken by the Bank, a multi-language website, mass media and social media presence and an investor relations contact point within the Bank. Continuous monitoring and evaluation: Performance metrics – Performance metrics have been established to provide strategic guidance as well as performance measurement tools related to sustainability related activities of the Bank. These are both long term (decarbonisation related) and short term (operational and support activities). Regular reviews – The Bank has established a formal mechanism for regularly reviewing the progress of sustainable financing and peripheral activities, with progress reports being submitted to several authorities such as the Executive Sustainability Management Committee (ESMC), Credit Committee (CC) and the Board Integrated Risk Management Committee (BIRMC).
	Progress (qualitative and quantitative)	Financial Investment: During the year the Bank allocated a specific budget to achieve through annual sustainable financing target. Please refer to the Natural Capital section (Pages 137-159) for more details. Financing under this target includes Sri Lanka Green Finance Taxonomy eligible climate financing as well. Human Capital Development: During the year, the Bank conducted 16 awareness sessions and workshops for staff on Sustainability and ESG-related topics. These enables our staff to identify climate financing opportunities. For further details, please refer to the Natural Capital section (Pages 137-159). External consultancy was obtained to capacity building on implementation of SLFRS S1 & S2. Stakeholder Engagement: The Bank conducted a stakeholder engagement survey and a materiality assessment during the year. Please refer to Our Commitment To Stakeholder (Pages 50-57) and Materiality (Pages 58-65) of this report. Continuous Monitoring and Evaluation: The Bank reported to the ESMC every six weeks, completing eight meetings during the year. Quarterly updates were also provided to the BIRMC. In addition, the Sustainability Department submitted three papers to the CC, four papers to ALCO, and several submissions to the Board on climate-related matters, including green financing, renewable energy initiatives, climate related disclosures for the Annual Report, E&S risk evaluations, and broader sustainability performance.
Financial Effects	Current year financial effects to PL, BS and CF	Refer Table A below which outlines the known or observable impacts on financial position, performance, and cash flows during the reporting period ended 31 December 2025.
	Significant risk of material adjustments to carrying value of assets and liabilities in the next financial year	Based on the Bank’s current assessment of climate-related risks and opportunities, a material adjustment has been recognised in connection with the issuance of the GSS+ Bond amounting to LKR 10,000 Mn. The Bank anticipates interest income of LKR 2,739 Mn from its green lending portfolios and sustainability-linked loans, while the expected interest expense arising from green and blue bond financing amounts to LKR 1,654 Mn. In addition to that, potential investment opportunities in climate-aligned sectors, increased credit demand from climate-negative industries for investing in de-carbonisation, etc. will continue to be monitored due to their potential proximity to materiality thresholds.
	Anticipated financial effect over short, medium and long term to PL, BS and CF	This will be performed as of 31 December 2027, making use of the transitional relief provided in the standard. Please refer to “1.8 Transitional Relief” under Basis of Preparation of this section.
Climate Resilience	Resilience Assessment	This will be performed as of 31 December 2027, making use of the transitional relief provided in the standard. Please refer to “1.8 Transitional Relief” under Basis of Preparation of this section.
	How and When Climate Scenario Analysis was performed. Disclosure of (i) Inputs; (ii) Key Assumptions, and (iii) Reporting period in which scenario analysis was carried out	This will be performed as of 31 December 2027, making use of the transitional relief provided in the standard. Please refer to “1.8 Transitional Relief” under Basis of Preparation of this section.
Judgements and Uncertainties	Judgments	Refer Table B on judgements that the bank has made in the process of financial quantification of the identified CRROs.
	Uncertainties	Refer Table C on the uncertainties which may affected the amounts being reporting, assumptions and approximations the bank has made in quantifying financial impacts of the identified CRROs.

Reference Tables for Disclosures on Strategy

Table A:

Impact on Income Statement, Statement of Financial Position and Statement of Cash Flow on the CRROs identified

Climate Related Risk and Opportunities (CRRO)	Potential Impact Description	Current Financial Effect LKR' Mn	Financial Statements Note Reference
Income Statement
CRR1 – Physical Risk: Acute	Increase in Expected Credit Loss (ECL) due to higher default risk of affected customers from cyclone Ditwah	698	Included in Note 16
CRR2 – Transition Risk	Interest income from lending to carbon intensive sectors	10,558	Included in Note 11
CRO1 – Opportunity: Sustainable Finance	Interest income from green lending portfolio	1,073	Included in Note 11
	Interest expense from green and blue bond financing	546	Included in Note 11
Statement of Financial Position
CRR1 – Physical Risk: Acute	Exposure to customers affected by the cyclone Ditwah who may request concessions or moratoriums	12,742	Included in Note 32
CRR2 – Transition Risk	Decrease in exposure to carbon-intensive sector as at 31 December 2025	7,418	Included in Note 32
CRO1 – Opportunity: Sustainable Finance	Increase in exposure of green loans as at 31 December 2025	3,686	Included in Note 32
	Increase of green financing and blue bonds As at 31 December 2025	6,506	Included in Notes 46 and 47
Statement of Cash Flow
CRR2 – Transition Risk	Increase in Operating Cash Flow due to interest income from carbon intensive sectors	10,558	Included in Operating Cash Flow
CRO1 – Opportunity: Sustainable Finance	Decrease in Investment Cash Flow due to investment in Green Bonds and Social Bonds during the year 2025	800	Included in Investing Cash Flow
	Increase in Operating Cash Flow from interest income of green lending portfolio	1,073	Included in Operating Cash Flow
	Decrease in Operating Cash Flow due to interest expense from green and blue funding sources	546	Included in Operating Cash Flow
	Increase in Financing Cash Flow with the issuance of green bonds and blue bonds, potential lower cost of funds due to ESG premium	6,506	Included in Financing Cash Flow
	Decrease in Operating Cash Flow due to green project financing.	3,686	Included in Operating Cash Flow

Table B:

Judgements the bank has made in the process of financial quantification of CRROs

In the process of preparing climate-related financial disclosures, the bank makes various judgements, apart from those involving estimations, that can significantly affect the information reported in the climate-related financial disclosures. The bank makes judgements in:

Item		Note	Page No.
(i)	Identifying climate-related risks and opportunities that could be reasonably expected to affect the bank's prospects
(ii)	Determining which sources of guidance to apply in accordance with paragraphs (Ex: SASB, GRI, SLFRS Sustainability Disclosure etc.)
(iii)	Identifying material information to include in the climate-related financial disclosures
(iv)	Establishing the criteria for determining whether credit risk on the financial asset has increased significantly since initial recognition, determining methodology for incorporating forward-looking information into measurement of Expected Credit Loss (ECL) and selection and approval models used to measure ECL.	16	381

Table C:

Uncertainties which may affect the amounts, assumptions and approximations the bank has made in quantifying financial impact of CRROs.

Measurement uncertainty

Information about assumptions and estimation uncertainties that have a significant risk of resulting in material adjustments to the carrying amounts of assets and liabilities is included in the following notes:

Item		Note	Page No.
(i)	Impairment of financial instruments: determining inputs into the ECL measurement model, including incorporation of forward looking information and key assumptions used in estimating recoverable cash flows.	16,32	381, 413
(ii)	Estimated interest income loss from clients affected by Cyclone Ditwah for the next financial year: key assumptions regarding applicable interest rates and other relevant financial parameters incorporated in assessing the interest income loss attributable to clients impacted by Cyclone Ditwah.
(iii)	Estimated interest income from clients in carbon-intensive sectors for the next financial year: key assumptions regarding applicable interest rates and the clients’ status with respect to their transition planning incorporated in assessing the interest income.
(iv)	Estimated interest income and expense from green financing and lending for the next financial year: key assumptions regarding applicable interest rates and their relevant financial parameters incorporated in assessing the interest income and expense.

4.1 Processes and Policies Relating to Climate-related Risks

DFCC Bank’s approach to managing climate-related risks is fully embedded into its Integrated Risk Management (IRM) Framework, consistent with the governance arrangements and strategic direction approved by the Board.

In line with SLFRS Sustainability Disclosure Standards, CBSL Sustainable Finance Roadmap, and internationally accepted frameworks such as the IFC Performance Standards, climate-related risks are recognised as financially material sustainability-related risks and opportunities (SRROs) and are managed as cross-cutting risk drivers that transmit into the Bank’s established risk categories, including credit, market, liquidity, operational, reputational, and strategic risks.

The framework for managing climate-related risks is governed by the ESG Risk Policy and implemented through the Environmental and Social Management System (ESMS). Oversight is exercised by the Board Integrated Risk Management Committee (BIRMC), in alignment with its responsibilities under the Governance framework. Management-level implementation and monitoring are carried out through the Bank’s established risk governance structure and the Three Lines of Defense model, ensuring consistency with the Bank’s overall risk culture and control environment.

4.1.1 Identification

Climate-related risks are identified across the DFCC Group’s lending, investment, and operational activities to ensure early detection of both physical and transition risks. The identification process is designed to capture risks arising from changes in climate patterns, regulatory developments, market transitions, technological shifts, and evolving stakeholder expectations.

Climate risk identification is not treated as a stand-alone exercise but is integrated into credit appraisal, sector exposure analysis, portfolio monitoring, and enterprise risk assessments to ensure consistency and comparability across the Bank. Hence climate-related risks are considered within the broader sustainability risk landscape and are recognised as cross-cutting risk drivers that transmit into traditional risk categories, including credit, market, liquidity, operational, reputational, and strategic risks.

4.1.2 Inputs, Parameters and Time Horizons

To ensure robustness, consistency, and decision-usefulness, we have applied a defined set of internal, external, and financial inputs when identifying climate-related risks

Internal inputs include:

• Energy consumption and emissions data from the Bank’s own operations
• Operational footprint and business continuity parameters
• Sectoral and geographic exposure of the lending portfolio
• Collateral types and vulnerability to climate hazards
• Supply chain dependencies and critical service providers

Regulatory and external inputs include:

• National environmental regulations and climate-related policies
• Climate hazard and geospatial data relevant to Sri Lanka
• Industry benchmarks and transition pathways
• Carbon pricing signals and disclosure requirements
• Client sustainability commitments and sector-specific transition requirements

Financial parameters considered include:

• Potential impacts on cost of capital and funding access
• Changes in insurance availability and premium costs
• Capital expenditure requirements for climate resilience
• Effects on asset quality, profitability, impairment provisioning, and capital adequacy following climate events

These inputs are operationalised through the ESMS, with enhanced ESG due diligence applied to lending exposures above defined thresholds, in line with the ESG Risk Policy, regulatory requirements, and IFC Performance Standards. This ensures that climate-related considerations are embedded consistently at the transaction, sector, and portfolio levels.

In defining time horizons, we have aligned climate risk assessment with internal strategic planning, capital planning, ICAAP and target-setting processes. Please refer to “1.6.Time Horizons” under “Basis of Preparation” section for the time horizons applicable for this report.

4.1.3 Assessment Methodology

Climate-related risks are assessed within DFCC Bank’s IRM Framework, in line with the ESG Risk Policy, using a structured combination of qualitative assessment techniques and quantitative analysis where methodologies and data are currently available.

The Bank assesses SRROs, including climate-related risks, based on three core dimensions – nature, likelihood, and magnitude (exposure). These dimensions together inform the assessment of financial materiality and the prioritisation of risk management actions.

4.1.4 Climate-related Scenario Analysis

Where appropriate, climate-related risk considerations are incorporated into the Bank’s existing stress testing framework in line with the Stress Testing Policy and the Internal Capital Adequacy Assessment Process (ICAAP), primarily through credit risk transmission channels.

We recognise the importance of climate-related scenario analysis in assessing portfolio resilience and identifying emerging vulnerabilities. In line with the transitional relief provisions of SLFRS S2, the Bank has not yet implemented portfolio-wide quantitative climate scenario analysis. The quantification of climate-related financial impacts on profit and loss, balance sheet, and cash flows will be progressively enhanced as data availability and methodological maturity improve, in accordance with approved governance processes, over the next two years.

4.1.5 Prioritisation of Climate-related Risks

Prioritisation relative to other types of risk

Climate-related risks are not treated in isolation but are fully integrated into DFCC Bank’s traditional risk categories, including credit, market, operational, liquidity, reputational, and strategic risks. Prioritisation is based on assessed likelihood and severity, allowing climate risks to be ranked relative to other material risks. This approach allows the Bank to focus on high-impact, climate-sensitive industries.

Within the IRM framework, climate risks are evaluated using a likelihood–impact matrix and visualised through heat maps to identify high-risk sectors requiring enhanced monitoring or mitigation. ESG risks are classified as Pillar II risks and are incorporated into the Internal Capital Adequacy Assessment Process (ICAAP), ensuring capital adequacy considers sustainability-related vulnerabilities

Key transmission channels include:

• Credit risk: borrower cash-flow deterioration from climate events or regulatory changes.
• Market risk: valuation impacts from carbon prices, stranded assets, sector repricing.
• Operational risk: disruptions to branches, data centers, suppliers, workforce.
• Liquidity risk: funding constraints in stressed sustainability scenarios.
• Reputational/conduct risk: greenwashing, client controversies, non-compliances.
• Strategic risk: shifts in customer preferences and business models.

Oversight is provided by the BIRMC, which reviews emerging climate-related exposures and materiality assessments.

4.1.6 Monitoring and Reporting

Monitoring of climate-related risks is embedded into DFCC Bank’s daily operations and periodic risk reviews through a multi-tier governance structure. Key elements include:

• Continuous tracking of regulatory developments, industry trends, and emerging sustainability risks.
• Leveraging internal risk dashboards and external intelligence to identify potential impacts on credit, operational, and reputational risk profiles.
• Integrating ESG risk indicators into the Bank’s risk appetite framework and Key Risk Indicators (KRIs) for timely escalation and action. These ESG KRIs are updated annually to incorporate current practices.
• Formalising an ESG Risk Appetite with defined thresholds for high-risk sectors and an Exclusion List for unwarranted lending.
• Portfolio-level monitoring of climate-sensitive sectors and geographic exposures.
• Post-disbursement reviews of credit facilities carried out by the Loan Review Monitoring Unit of the IRM Department, to ensure ongoing adherence to ESG criteria and mitigation plans.

Regular reviews of ESG risk processes and performance and reporting the same to the BIRMC, supported by Management Committees, ensure accountability and timely escalation of emerging risks.

4.1.7 Review and Continuous Improvement

Climate-related risk management processes are reviewed periodically as part of DFCC Bank’s broader IRM and ESG governance framework. Enhancements arising from regulatory developments, changes in risk profile, or methodological improvements are reviewed by Management and approved by the BIRMC, with material matters noted to the Board.

4.1.8 Changes in the Process

During the reporting period, DFCC Bank strengthened the integration of climate-related risk management within its overall risk framework through the implementation of the ESG Risk Policy and enhancements to the ESMS. The ESG Risk Policy now serves as a comprehensive framework, aligned with the Bank’s IRM Framework, and is overseen by the BIRMC.

Key developments include:

• Policy Implementation: The ESG Risk Policy was developed to operationalise across lending and investment processes, ensuring systematic identification and management of climate-related risks.
• Governance and Reporting: Regular reporting to the BIRMC and the Board commenced, reinforcing accountability and transparency in ESG risk oversight.
• Annual Process Review: The Bank has instituted an annual review of ESG and climate risk processes to document and approve changes such as; Methodology enhancements, Governance updates, System and data improvements (e.g., introduction of geo-metric classifications), Adjustments to materiality thresholds and Capacity-building initiatives
• Approval and Disclosure: Significant changes are approved by the BIRMC and noted to the Board, ensuring robust governance.

In line with transitional relief provided from SLFRS sustainability disclosure standards, the Bank will phase in scenario-based quantitative disclosures over the next two years.

4.2 Processes and Policies Relating to Climate-related Opportunities

DFCC Bank recognises that climate-related opportunities are a critical component of its long-term strategy and financial resilience. The Bank’s approach to climate-related opportunities is grounded in its commitment to support Sri Lanka’s transition to a low-carbon, climate-resilient economy while delivering sustainable value to shareholders, customers, and communities. This approach is aligned with the Central Bank of Sri Lanka’s Sustainable Finance Roadmap, Nationally Determined Contributions (NDCs), and internationally recognised sustainability frameworks.

Sustainable Financing has been identified as the Bank’s primary climate-related opportunity. Through sustainable financing, DFCC Bank seeks to enable investments that contribute to emissions reduction, climate adaptation, and environmental protection, while also unlocking growth opportunities in emerging green and blue economy sectors. Climate-related opportunities are therefore not viewed solely as thematic products, but as an integral part of the Bank’s core business strategy and portfolio development.

4.2.1 Identification

DFCC Bank identifies climate-related opportunities through a structured and forward-looking process that combines market intelligence, sectoral analysis, regulatory developments, and active stakeholder engagement. The identification process focuses on sectors and activities that are expected to benefit from the transition to a low-carbon and climate-resilient economy, as well as from increasing regulatory, investor, and customer demand for sustainable financial solutions.

Key opportunity areas include renewable energy, energy efficiency, clean transportation, sustainable infrastructure, water and sanitation, marine and coastal resilience, and ocean-based sustainable economic activities that support Sri Lanka’s green and blue economy potential. These areas are identified based on their alignment with national development priorities, climate adaptation needs, and the Bank’s sectoral expertise.

Since the implementation of the ESG Risk Policy, DFCC Bank has strengthened its engagement with customers to better understand sector-specific transition pathways and climate-related investment requirements. Through these engagements, the Bank supports clients in identifying opportunities to adopt cleaner technologies, improve resource efficiency, and enhance climate resilience. This proactive engagement also enables the Bank to offer advisory support for sustainability-linked financing, green loans, and climate adaptation projects, positioning DFCC Bank as a trusted partner in its clients’ transition journeys.

Market and Sector Analysis

Market and sector analysis plays a central role in identifying and refining climate-related opportunities. DFCC Bank continuously analyses macroeconomic trends, policy signals, technology developments, and sector-specific transition pathways to identify areas with strong growth potential and increasing demand for sustainable finance. Particular attention is given to sectors where climate action is expected to drive structural change, such as renewable energy generation, energy-efficient manufacturing, sustainable agriculture, and marine ecosystem restoration.

This analysis is complemented by engagement with regulators, regulatory guidelines, industry bodies, and development partners, enabling the Bank to anticipate emerging opportunities and align its financing solutions with evolving national and international expectations.

DFCC Bank identifies climate-related opportunities through
Market and Sector Analysis	Stakeholder Engagement	Alignment with National Priorities
Market and sector analysis to pinpoint areas with high potential for climate- aligned growth (e.g., renewable energy, energy efficiency, marine eco-system enrichment, etc.)	Engage with clients, regulators, and industry bodies to understand emerging sustainability needs	Alignment with national priorities, including the CBSL Sustainable Finance Roadmap and global standards such as IFC Performance Standards on Environmental and Social Sustainability

4.2.2 Assessment

DFCC Bank applies a structured and multi-dimensional framework to assess climate-related opportunities, ensuring that each opportunity is both strategically aligned and financially viable. The assessment process evaluates the commercial attractiveness, scalability, and risk profile of opportunities, while also considering their contribution to climate and sustainability objectives.

Market demand and scalability are assessed by analysing current and projected demand for sustainable financing solutions across priority sectors, client readiness, and the potential to scale solutions in line with national and global climate goals. Regulatory alignment is assessed to ensure compliance with applicable requirements, including the CBSL Sustainable Finance Roadmap, SEC and CSE regulations, ICMA principles, and IFC Performance Standards.

Financial assessments focus on risk-adjusted returns, credit quality, and portfolio diversification benefits. Opportunities that enhance diversification and reduce concentration risk are prioritised. Forward-looking considerations are also incorporated, including anticipated policy changes, technology cost trends, and evolving market dynamics. As the Bank’s climate analytics mature, these assessments will progressively incorporate climate pathways and scenario-based considerations, in line with SLFRS S2 transitional relief.

4.2.3 Prioritisation

Climate-related opportunities are prioritised through a structured decision-making process that balances strategic alignment, financial performance, scalability, and impact. DFCC Bank applies impact chain analysis to understand the cause-and-effect relationship between its financing activities and their environmental and social outcomes, enabling the Bank to prioritise opportunities that generate the most meaningful positive impact.

Opportunities are also evaluated for their strategic fit with DFCC Bank’s sustainability ambition to be a leading contributor to sustainable development by 2030. Capital allocation efficiency and scalability are key considerations, with preference given to opportunities that can be scaled across sectors and geographies while maintaining prudent risk-return profiles. Client readiness and market adoption potential are assessed to ensure timely deployment and effective utilisation of sustainable finance solutions.

Accordingly, DFCC Bank considers the following key areas to ensure that climate-related opportunities are aligned with strategic objectives and deliver measurable impact.

4.2.4 Monitoring

The Bank monitors the performance and progress of climate-related opportunities through defined governance structures and performance metrics. Monitoring is an ongoing process integrated into existing management reporting and oversight processes to ensure transparency, accountability, and alignment with strategic objectives.

• Key Performance Indicators (KPIs)

Performance is tracked through clearly defined KPIs including; green finance volumes, portfolio share of climate aligned sectors, impact metrics such as estimated emissions avoided or energy savings where applicable

• Portfolio concentration and exposure metrics

Through monitoring portfolio concentration in climate-aligned sectors and applying exposure limits to maintain diversification as well as manage risk, the Bank ensures that the sustainable financing initiatives contribute positively to both financial performance and climate objectives.

• Continuous monitoring and market intelligence

The Bank conducts continuous monitoring of regulatory changes, industry trends, and emerging sustainability opportunities to stay ahead of market developments. This proactive approach enables timely adjustments to the strategy and our product offerings.

• ESG reporting

The Bank provides disclosures on ESG performance and climate related opportunities through its annual report.

• Regular reviews and assurance

Periodic management reviews, reporting to BIRMC and Board, and external assurance where its material is obtained to strengthen credibility of disclosures and frameworks developed for launch of new offerings such as sustainable bonds.

4.2.5 Scenario Analysis

DFCC Bank has not yet commenced formal scenario analysis for climate-related opportunities. In line with the transitional relief provisions of SLFRS S2, the Bank has adopted a phased approach to incorporating scenario-based assessments. Over the next two reporting periods, scenario analysis will be progressively introduced to test the resilience, timing, and scalability of sustainable financing opportunities under different climate pathways. Once implemented, these insights will guide strategic planning, product development, capital allocation, and client engagement strategies.

4.3 CRRO Integration to Overall Enterprise Risk Management

DFCC Bank does not manage climate-related risks and opportunities in isolation. They are embedded within the Bank’s Integrated Risk Management (IRM) Framework, ensuring consistency with the Bank’s overall risk governance and strategic objectives. This integration is guided by the ESG Risk Policy, which provides detailed provisions for identifying, assessing, prioritising, and monitoring SRROs, including CRROs. The Bank ensures that its sustainability efforts are reflected in its financial resilience.

Oversight is provided by the Board Integrated Risk Management Committee (BIRMC), which also functions as the Board Sustainability Sub-Committee. This governance structure ensures that decisions on climate-related risks and opportunities are subject to the same rigor as other material risks and strategic initiatives. Integration is further supported through cross-functional collaboration among Risk Management, Sustainability, Finance, Operations, and business units, ensuring climate considerations are embedded across credit policies, sector strategies, stress testing, and strategic planning.

Key Integration Mechanisms are:

• Inclusion in the IRM Framework

Prioritised material SRROs, including climate-related risks and opportunities, are incorporated into the Bank’s IRM framework, ensuring they are considered alongside credit, market, operational, liquidity, and strategic risks.

• Risk Appetite and Capital Allocation

Climate-related risks and opportunities such as sustainable financing are evaluated against the Bank’s risk appetite statements and capital allocation strategy. This ensures that climate considerations strengthen portfolio resilience while maintaining prudent risk-return profiles. DFCC maintains a capital cushion over the minimum regulatory requirements to absorb unexpected crystallisation of risks, including those identified under Pillar II stress testing.

• Cross-FunctionalCollaboration

Integration is supported by collaboration between Risk Management, Sustainability, Finance, Operations, and business units. This approach ensures ESG factors are embedded across credit policy, sector lending standards, stress testing, and strategic planning.

• Board Oversight and Strategic Decision-Making

The Board of Directors has oversight of ESG risks and opportunities, ensuring they are considered in strategic decisions, capital planning, and business model evolution.

5.1 Cross Industry Metrics

DFCC Bank’s climate risk management framework integrates both physical and transition risks into credit assessments, portfolio planning, and operational resilience strategies. In accordance with SLFRS S1 and S2, the Bank discloses following key sustainability related cross industry metrics that reflect its exposure to CRROs.

5.1.1 Greenhouse Gas Emissions

In line with DFCC Bank’s climate objectives, we measure organisational greenhouse gas (GHG) emissions associated with our operations. This includes the measurement of Scope 1 and Scope 2 emissions. Consistent with the transitional relief provisions under SLFRS sustainability related financial disclosure standards, Scope 3 emissions are not reported in this disclosure.

The assessment of emissions was conducted in partnership with RR Associates (Pvt) Ltd, following internationally recognised standards – the GHG Protocol Corporate Accounting Standard and ISO 14064-1:2018 standard. Independent verification was obtained from the Sri Lanka Climate Fund, an accredited verifier, ensuring the accuracy and credibility of our emissions data.

As part of our commitment to responsible banking and enhanced environmental transparency, DFCC Bank became a signatory to the Partnership for Carbon Accounting Financials (PCAF). By adopting PCAF guidelines, we have initiated process improvements to prepare portfolio-level emissions data under selected asset classes specified by PCAF, with the motive of supporting our customers in managing climate risks.

In 2024, DFCC Bank expanded its emissions reporting boundary to include both the Bank and its subsidiaries. For 2025, we continue this practice by reporting the DFCC Group’s emissions. When determining materiality for defining the organisational boundary, the Bank adopted the Financial Control approach in accordance with the GHG Protocol.

DFCC Bank fully consolidates its three subsidiaries, namely LINDEL, Synapsys, and DFCC Consulting in its financial statements. However, DFCC Consulting did not have any physical activity during 2025. As a result, there are no GHG emission sources to be reported for DFCC Consulting. Accordingly, the DFCC consolidated accounting group GHG emissions represent the total carbon footprint of DFCC Bank, including all branches, Synapsys, and LINDEL.

Scope 1 and 2 emissions of consolidated accounting group for the year 2025

Description	Greenhouse gas emissions (metric tonnes CO2e) 2025
	Scope 1	Scope 2	Total
Consolidated accounting group	703.982	2,659.663	3,363.645
Other investee (investment in associate, joint ventures)	N/A	N/A	N/A
Total (Financial control approach)	703.982	2,659.663	3,363.645

The following are the key assumptions and sources that we used for GHG Scope 1 & 2 measurement.

1. Key Assumptions and Sources of GHG Measurement

Scope	Emission Sub-category	Activity	Data Source	Emission Factor	Source of GWP Values
Scope 1	Stationary combustion	direct combustion of diesel used for standby generators	Fuel purchased/ used records	2.69kg CO2/GJ (IPCC emission factors)	GWP values published by the IPCC for a horizon of 100 Years – sixth assessment report (AR 6)
Scope 1	Mobile combustion	fossil fuels (diesel and petrol) combusted in owned vehicles for business travel on land	Fuel purchased/ used records	Petrol: 2.37 kg CO2/l Diesel: 2.72 kg CO2/l (IPCC emission factors)
Scope 1	Process combustion (only at LINDEL)	methane (CH4) generated by the wastewater treatment plant at company premises and waste combustion at company premises.	Quantified waste records, Wastewater treatment and discharge records	0.92 kgCO2/kg Waste (DEFRA emission factors)
Scope 1	Fugitive Emissions	leakages or releases of refrigerants (from refrigeration and air conditioning equipment) and CO2 from fire extinguishers.	Purchase records for replaced CO2 fire extinguisher tanks, repair and breakdown records,	R134a: 1,530kg CO2/kg R410a: 2,256kg CO2/kg R407a: 2,262kg CO2/kg R32: 771 kg CO2/kg R417a: 2,508 kg CO2/kg R404a: 4,728 kg CO2/kg (IPCC emission factors)
Scope 2	Electricity Consumption	consumption of purchased electricity under the organisation’s control	monthly utility bills	0.42 kg CO2/ kWh (Sri Lanka Energy Balance 2024 by Sri Lanka Sustainable Energy Authority)

2. Estimated uncertainty percentage: cumulated uncertainty +/- 2.9%

Please refer to the pages 522-523 of this Annual Report for the GHG verification statement.

5.1.2 Climate-related physical risks

DFCC Bank recognises that climate change poses significant physical risks to its operations and its stakeholders. Increased frequency and severity of climate-induced extreme weather events such as floods, droughts, storms, high winds, and related health risks are identified as the Bank’s climate-related physical risk.

The Bank is currently in the process of quantifying the amount and percentage of assets or business activities vulnerable to climate related physical risks, and this information will be presented in the next reporting period.

5.1.3 Climate-related transition risks

DFCC Bank recognises that transition risks arise from exposure to carbon-intensive sectors without adequate transition planning or financed emissions tracking. These risks can lead to credit and market impacts due to regulatory changes, carbon pricing, and evolving stakeholder expectations. Certain economic sectors financed by the Bank may face penalties or business model disruptions, creating knock-on effects on our lending portfolio.

As of 31 December 2025, the Bank’s outstanding SLGFT compliant credit facilities in sectors vulnerable to climate-related transition risks amount to LKR 11.73 Bn (refer table in section 3.1.4), representing 61% of the identified sustainable lending portfolio. The largest exposures of this are to renewable energy projects (LKR 9.59 Bn; 82%). While these sectors contribute to climate mitigation, they also face transition challenges such as technology shifts, certification requirements, and regulatory compliance. DFCC Bank continues to monitor these exposures and plans to strengthen financed emissions tracking and transition planning in future reporting periods.

5.1.4 Climate related opportunities

DFCC Bank views climate-related opportunities as financing activities that support climate change mitigation, adaptation, and resilience. This includes investments in renewable energy, green buildings, climate-smart agriculture, energy efficiency, climate-resilient infrastructure, and other decarbonisation efforts. Additionally, the Bank leverages sustainable finance instruments such as green, social, and sustainable bonds and introduces innovative products like green deposits and solar loans to promote sustainable practices among customers.

As a pioneer in sustainable finance in Sri Lanka, DFCC Bank issued the country’s first Green Bond in 2024 and Blue Bond in 2025, reinforcing its commitment to mobilising capital for climate-positive initiatives. LKR 2.5 Bn of Green Bonds were raised in September 2024 and listed on the CSE, LGX, and NSC while LKR 3 Bn (face value) of Blue Bonds were raised and listed on the CSE in November 2025. These instruments enable the Bank to channel funds toward projects that reduce greenhouse gas emissions, enhance resource efficiency, and build resilience against climate risks. In addition to credit lines such as the ADB’s Environmentally Friendly Solutions Fund II, the Bank has also raised bilateral funds exclusively for climate financing from funding agencies such as Symbiotics.

Description	Number of facilities	Outstanding value as at 31 December 2025 (LKR)
Investment in Renewable Energy
– Green Bond	1	500,000,000
Investment in Renewable Energy
– Mini hydro	7	1,262,716,334
– Biomass	2	459,406,266
– Wind	2	387,111,104
– Solar (Ground mounted)	11	3,295,069,009
– Solar (Rooftop)	383	4,185,611,662
Sub Total	405	9,589,914,375
Agriculture related activities	48	951,107,086
Other climate related sustainable activities	93	1,192,129,557
Total	546	11,733,151,019
Issuance of Climate-related Bonds
– Green Bond	1	2,500,000,000
– Blue Bond	1	3,000,000,000

3.1.5 Capital deployment

DFCC Bank’s capital deployment strategy is designed to support sustainable growth while addressing climate-related risks and opportunities. Although a specific CRRO budget has not been separately defined, the Bank has incorporated climate-focused initiatives within its strategic plan. These allocations aim to strengthen resilience against physical and transition risks and to capitalise on emerging opportunities in renewable energy and sustainable finance.

Category	Description	% of total future CAPEX
Physical Risk Mitigation	Infrastructure upgrades, disaster recovery systems and climate resilient measures: In light of increasing intensity of business interruptions, the Bank has implemented a comprehensive Business Continuity Plan (BCP) which is to be called upon in the event of a major work disruption, This includes having our servers located off-site with necessary security and redundancy protocols, ability for a majority of support services staff to work from home with cloud access to working documents and file servers, and identification of alternate work locations if the primary work location becomes inaccessible. The Bank has increased its digital service delivery footprint through ATM/CDM/CRM machines, online banking and app-based services so that most of our customers can carry out their banking transactions even when physical access to a branch becomes impossible. The Bank regularly carries out BCP drills including system cutover to alternate sites, fire drills, mock disaster drills etc. to ensure all systems and functions are ready to function as intended in the event of a disaster.	1% – 5 %
Transition Risk Mitigation	Investments to comply with evolving climate regulations and adopt low carbon technologies	<1%
Investment in renewable energy	The Bank takes a keen interest in financing renewable energy development. Having financed the country’s first hydro, wind, grid-scale solar and waste to energy projects, DFCC Bank has always been at the forefront in supporting the greening of the country’s energy landscape. As at 31 December 2025, the Bank’s renewable energy portfolio was at LKR 9.6 Bn, with many more projects in the financing pipeline. The Bank has also taken initiatives to reduce its own carbon footprint by installing solar rooftop systems at several of its buildings (Head Office (150kW), Ramanayake Mawatha (36kW), Borella (40kW), Kurunegala (50kW) and Negombo(27kW), with a key limitation for further capacity addition being the rented nature of most of our business premises. LINDEL, DFCC’s 51.16% subsidiary which owns and manages an industrial estate at Sapugaskanda has implemented 1.44MW of rooftop solar projects and recently established a specialised subsidiary to carry out further renewable energy projects. As of end 2025, this company, LINDEL ACP Renewables Ltd, has completed the construction of one project (480kW) and is in the process of implementing two more (700kW and 650kW) at LINDEL premises.	1% – 5 %
Other climate related opportunities	The Bank is very cognizant of the need to reduce its operational carbon and waste footprint and that digitalisation is the way forward. In this regard, the Bank has implemented several steps to reduce its impact on the environment. The Bank has significantly reduced the use of paper based workflows by replacing with electronic workflows. All credit approvals now take place through electronic documents and authorisations (other than where paper documents are required for legal purposes). Most of the Bank’s customer communications and advertising is carried out through digital means (electronic statements, emails, app and online banking-based messaging, voice and chatbot based query resolutions, hotlines for inquiries and even electronic customer onboarding. All of our customers are encouraged to use electronic means to communicate with the Bank, and wherever possible, to carry out transactions as well. The Bank recognises that it has an impact on the environment whenever capital expenditure is made – such as construction and renovation of buildings and purchasing of fixed assets. Therefore, the Bank integrates principals of sustainability into its capital expenditure such as the purchase of energy efficient appliances (e.g. air conditioners) and computers (laptops to replace desktops) LED lighting to replace fluorescent lights, to name a few. In order to promote sustainable practices among our customers and to help the country progress along with its decarbonisation and waste reduction strategy, the Bank has been at the forefront in financing renewable energy, energy efficiency and waste management projects in addition to raising funds through innovative instruments such as Green and Blue bonds to support environmentally friendly initiatives of our customers. We understand and recognise the importance of SME and MSME entrepreneurs in the role of reducing poverty, improving economic equality, and rural development. Accordingly, the Bank has a comprehensive suite of MSME financing products available at very competitive terms (often concessionary terms) which have helped rural communities improve access to the formal financial sector.	~1%

5.1.6 Internal carbon pricing

DFCC Bank has not yet implemented an internal carbon pricing mechanism within its operations. However, the Bank recognises the growing importance of carbon pricing as a strategic tool to manage climate-related risks and align with global sustainability practices. We understand that internal carbon pricing can help quantify the financial impact of GHG emissions, incentivise low-carbon initiatives, and guide investment decisions toward sustainable outcomes. While this framework is not currently in place, DFCC Bank is actively monitoring regulatory developments and market trends and may consider adopting an internal carbon pricing approach in future reporting periods, as required by evolving standards and stakeholder expectations.

5.1.7 Remuneration

DFCC Bank does not yet have a dedicated ESG-linked remuneration framework for the Board and Executive Management; however, the Bank is actively assessing its introduction for future reporting periods.

5.2 Industry Specific Metrics

Sustainability Accounting Standard Board (SASB) Index
Commercial Banking Sustainability Accounting Standard (Version 2023-12)

Table 1: Sustainability Disclosure Topics and Metrics
Topic	Metric	Category	Unit of Measure	Code	Disclosure reference and/or response
Data Security	(1) Number of data breaches (2) Percentage that are personal data breaches (3) Number of account holders affected	Quantitative	Number Percentage	FN-CB-230a.1	(1) No data breaches have been reported (2) No data breaches have been reported (3) Nil
	Description of approach to identifying and addressing data security risks	Discussion and Analysis	N/A	FN-CB-230a.2	Refer to Note No. 1 below.
Financial inclusion and Capacity Building	(1) Number of loans outstanding that qualify for programmes designed to promote small business and community development (2) Amount of loans outstanding that qualify for programmes designed to promote small business and community development	Quantitative	Number, Presentation Currency	FN-CB-240a.1	(1) Number of MSME and Micro clients: 7,942 (2) Value of loans of MSME & Micro Clients: LKR 5.18 Bn
	(1) Number of past due and non accrual loans or loans subject to forbearance that qualify for programmes designed to promote small business and community development (2) Amount of past due and nonaccrual loans or loans subject to forbearance that qualify for programmes designed to promote small business and community development	Quantitative	Number, Presentation Currency	FN-CB-240a.2	(1) Number of Non-Performing Loans: 1,506 (2) Outstanding amount of Non-Performing Loans: LKR 129.22 Mn
	Number of no-cost retail checking accounts provided to previously unbanked or underbanked customers	Quantitative	Number	FN-CB-240a.3	A minimum fee and interest are charged from the clients. Number of new MSME and Micro clients for the year: 4,761
	Number of participants in financial literacy initiatives for unbanked, underbanked, or underserved customers	Quantitative	Number	FN-CB-240a.4	7,346 participants
Incorporation of Environmental, Social, and Governance Factors in Credit Analysis	Description of approach to incorporation of environmental, social and governance (ESG) factors in credit analysis	Discussion and Analysis	N/A	FN-CB-410a.2	Refer to Note No. 2 below.
Financed Emissions	Absolute gross financed emissions (in Metric tons of CO2e), disaggregated by, (1) Scope 1, (2) Scope 2 (3) Scope 3	Quantitative	Metric tons (t)CO₂-e	FN-CB-410b.1	Refer to Cross Industry Metrics – 5.1.1. Greenhouse Gas Emissions in this report.
	Gross exposure for each industry by asset class	Quantitative	Presentation currency	FN-CB-410b.2
	Percentage of gross exposure included in the financed emissions calculation	Quantitative	Percentage %	FN-CB-410b.3
	Description of the methodology used to calculate financed emissions	Discussion and Analysis	N/A	FN-CB-410b.4
Business Ethics	Total amount of monetary losses as a result of legal proceedings associated with fraud, insider trading, antitrust, anticompetitive behaviour, market manipulation, malpractice, or other related financial industry laws or regulations	Quantitative	Presentation currency	FN-CB-510a.1	Nil
	Description of whistleblower policies and procedures	Discussion and Analysis	N/A	FN-CB-510a.2	Refer to Note No. 3 below.
Systemic Risk Management	Global Systemically Important Bank (GSIB) score, by category	Quantitative	Basis points (bps)	FN-CB-550a.1	DFCC Bank is not classified as a Global Systemically Important Bank (G-SIB). Therefore, this specific disclosure requirement does not apply within the Sri Lankan banking context.
	Description of approach to integrate results of mandatory and voluntary stress tests into capital adequacy planning, long-term corporate strategy, and other business activities	Discussion and Analysis	N/A	FN-CB-550a.2	Refer to Note No. 4 below.

Table 2: Sustainability Disclosure Topics and Metrics
Activity Metric	Category	Unit of Measure	Code	Disclosure reference and/or response
(1) Number and (2) value of checking and savings accounts by segment: (a) personal and (b) small business	Quantitative	Number, Presentation currency	FN-CB-000.A	Refer to Note No. 5 below.
(1) Number and (2) value of loans by segment: (a) personal, (b) small business, and (c) corporate	Quantitative	Number, Presentation currency	FN-CB-000.B	Refer to Note No. 5 below.

Notes to SASB Disclosures

1. Our approach to identifying and addressing data security risks

• The bank employs vulnerability management software along with other relevant controls to align with the CBSL Resilience Framework and ISO standards.
• All risk management activities are aligned with ISO 27001 and ISO 27035 standards. A comprehensive risk management process is in place, with direct reporting to the Information Security Committee (ISC) and the Bank’s Board Integrated Risk Management Committee (BIRMC).
• To address these threats, Security Operations Center (SOC) and Security Information and Event Management (SIEM) solutions are actively monitored, and threat intelligence channels are utilised.
• The bank has established policies and procedures for timely disclosure of data breaches in compliance with ISO 27001, ISO 27035, PCI DSS V4 and Sri Lanka’s Personal Data Protection Act (PDPA). The reporting process will be completed after the PDPA implementation project.
• The bank’s disclosure includes a detailed overview of its data and system security initiatives addressing emerging cyber threats and attack vectors in the financial services industry. In alignment with ISO 27001, ISO 27035, and ISO 20000, the bank has adopted a multi-layered security approach. This includes database encryption, continuous security awareness programs, regular security assessments, and comprehensive Vulnerability Assessment and Penetration Testing (VAPT) engagements. These measures are integrated into the incident response and risk management frameworks to ensure resilience, regulatory compliance, and proactive defense against evolving threats.
• The Bank operates within a regulatory environment governed by Sri Lanka’s Personal Data Protection Act (PDPA) and Central Bank directives, ensuring compliance with data security and privacy requirements. It maintains an Information Security Policy and a Data Protection and Privacy Policy, overseen by a dedicated Data Protection and Privacy Committee. These frameworks are aligned with ISO 27001 for information security management systems and ISO 27035 for information security incident management, ensuring robust governance, risk management, and adherence to international standards.
• The bank’s approach to data security and privacy is closely aligned with internationally recognised standards and regulatory frameworks. It is ISO 27001 and PCI-DSS V4 certified for Information Security Management and is progressing toward ISO 27035 for incident response and ISO 20000 for IT service management. A NIST Cyber-security Framework maturity assessment has been completed to benchmark resilience. These initiatives, combined with robust technical and procedural measures, ensure compliance with applicable legal and regulatory requirements while maintaining a proactive stance against emerging threats.

2. Our approach to incorporating ESG factors in credit analysis

DFCC Bank adopts a holistic approach to integrating Environmental, Social, and Governance (ESG) considerations into its credit evaluation process. This ensures that lending decisions are aligned with sustainable development principles and responsible banking practices. The key elements of this approach include:

(1) Environmental Assessment

• Evaluate the borrower’s environmental impact, including resource usage, emissions, and waste management.
• Review compliance with local environmental regulations and international standards.
• Consider environmental certifications (e.g., ISO 14001) and sustainability initiatives within business operations.
• Assess long-term resilience of the borrower’s business model in the context of climate-related risks.

(2) Social Assessment

• Examine social policies and practices, including labor standards, employee welfare, diversity, and inclusion.
• Evaluate community engagement initiatives and contributions to local socio-economic development.
• Assess customer protection measures and adherence to fair business practices.
• Consider the borrower’s role in promoting financial inclusion and social development.

(3) Governance Assessment

• Review corporate governance structures, including board composition, independence, and diversity.
• Assess transparency in executive compensation and alignment with shareholder interests.
• Evaluate risk management frameworks and internal controls to ensure ethical and compliant operations.

(4) Integration into Credit Risk Analysis

• Incorporate ESG risks and opportunities into credit risk assessments, influencing credit scoring and loan pricing.
• Utilise an internal ESG scoring system to identify and quantify potential risks.
• Adjust lending terms where necessary to mitigate ESG-related risks.

(5) Monitoring and Reporting

• Conduct regular monitoring of ESG performance throughout the loan lifecycle.

• Require periodic reporting from borrowers on ESG metrics and progress against agreed sustainability targets.
• Continuously update internal ESG frameworks to reflect evolving regulatory and market expectations.

3. Whistleblower Policies and Procedures

As per the Banking Act Direction No.11 of 2007 – Corporate Governance for Licensed Commercial Banks of Sri Lanka Section 3(6) Sub section (ii), q, and as per Banking Act direction No. 05 of 2024 Section V, the Board Audit Committee is responsible to establish proper communication channels to raise concerns about any irregularities, serious misconduct or infringement by employees/stakeholders of DFCC Bank and its subsidiary companies.

Accordingly, DFCC Bank Group Internal Audit Department with the recommendations of the Board Audit committee has developed the existing Bank’s “Group Whistle Blowing Policy” to establish the guidelines and Whistle Blowing mechanism for DFCC Bank and its Subsidiary Companies to maintain high standards of Corporate Governance.

The Whistle Blowing Policy consists of safe and effective procedures for disclosing on-going or potential misconduct, malpractices, misappropriations, and cover-ups. or reporting the same so that appropriate remedial action can be taken.

Internal and External whistle Blowers can either choose to alert his/her supervisor verbally or in writing or else can directly access the persons listed in the Policy such as the Chairman of the Board Audit Committee, Head of Internal Audit, Director/ Chief Executive Officer ,Chairman of the Bank and Chief Executive Officers of Subsidiary companies.

Upon receiving a Whistle Blowing, the Bank will promptly acknowledge the receipt to the whistleblower, either through the reporting channel used or via an alternative contact method if provided. The bank will communicate the findings, results, and any remedial actions taken to address the concerns back to the Whistle blower while preserving confidentiality.

Legitimate concerns received by relevant parties shall be directed to the Head of Internal Audit to be communicated to the Board Audit Committee. The Board Audit Committee or Head of Internal Audit as appropriate will decide on the best course of action to follow in dealing with such concerns, ensuring at all times the protection of the identity of the employees making the disclosure. If there is a prima-facie case to initiate investigations, the investigations may be either done internally or referred to an independent investigator. All the investigation reports will be shared with the Board Audit Committee and as applicable to the Fraud Risk Management Committee.

A staff member who has been an accomplice to a fraud or malpractice unintentionally under the influence of superior and later realises, can seek protection of this policy. However, the policy will not provide refuge to fraudsters who themselves may become Whistle Blowers and seek protection under the policy.

Further, any form of reprisal/revenge against anyone who in good faith acts as per the policy, is forbidden and will itself be regarded as a serious offence to be dealt with under disciplinary procedure.

4. Integration of Stress Testing Outcomes into Capital Planning and Strategic Decision-Making

Bank integrated ESG risk into its capital planning process to support strategic decision-making. An ESG Risk Index has been developed to evaluate key ESG risk categories using a weighted scoring methodology. Each sub-risk is assessed with the final score guiding the required management actions.

In addition, several ESG-related scenarios have been incorporated into the stress-testing framework, including climate-driven increases in Stage 3 loans, negative shifts in impairment stages for E&S-sensitive exposures, and potential deposit withdrawals due to flood or drought conditions, ensuring these risk exposures are appropriately captured in stress-testing outcomes.

5. Customer Account and Loan Portfolio Metrics by Segment

Current Accounts and Savings Accounts (CASA)

Sector	Portfolio (LKR Mn)	Number of accounts
Individual	62,054	657,465
Corporate, Commercial Banks, Registered Finance Companies and Government Institutions	54,169	5,331
MSME-Micro, Small and Medium	20,482	24,073

Loans

Sector	Portfolio (Pre-Collective Impairment) (LKR Mn)	Number of accounts
Individual	89,082	41,088
Corporate, Commercial Banks and Registered Finance Companies	274,449	5,500
MSME-Micro, Small and Medium	56,696	6,498

5.3 Climate-related Targets

During the reporting period, as part of the ESG strategy review, the Bank aligned departmental KPIs with the overarching ESG strategy, ensuring that each KPI corresponds to the Bank’s identified material themes which included climate-related targets to support mitigation, adaptation, and resilience. One such climate-related KPI is the Green Financing Target, which forms a key component of the DFCC Sustainability Strategy.

The Bank’s climate opportunity strategy is anchored by this Green Finance mobilisation target of LKR 100 Bn by 2030 complemented by product innovations such as climate-smart agriculture loans and leadership in sustainable capital markets including Sri Lanka’s first Green Bond and Blue Bond issuances.

Climate related Opportunity – Sustainable Financing

Metric/KPI/Measurement	Total Green Finance mobilised LKR 100 Bn by 2030 (cumulative)
Objective	Mitigation (e.g., emissions reduction) and Adaptation/Resilience (e.g., water security, coastal/waste infrastructure); supports DFCC Bank’s sustainability strategy
Scope	Bank-wide lending, dedicated funding lines and capital markets activities (including DFCC Bank originated green/blue bonds, funding sources such as Symbiotics for green financing, targeted sustainable products such as green deposits, solar loans).
Period	Year 2024 – 2030 (with annual reporting)
Base Period	Year 2024
Milestones and Interim Targets	Interim targets are set each year depending on business outlook towards achieving the LKR 100 Bn by 2030
Target Type	Absolute (Rupees mobilised)
Alignment with jurisdictional commitment	Supports Sri Lanka’s national climate commitments and sectoral decarbonisation pathways (NDC 3.0 Sri Lanka), Sustainable Finance Roadmap 2.0, Green Finance Taxonomy under Direction No. 05 of Banking Act aligned with the Bank’s role in mobilising private capital for mitigation/adaptation.
Validation	A third-party verification has not been obtained for the set target. However, the methodology used to set the target has been reviewed by the external consultant as part of the ESG strategy review assignment completed this year. Notwithstanding the above, an external audit assurance is obtained for Green Bond allocation and impact reporting. Please refer to the Natural Capital section (pages 137-159) of this report for the audit report.
Review Process	Progress on this green financing target is communicated to all staff on a monthly basis through a dedicated dashboard via EDM. Updates are formally reviewed every six weeks by the ESMC and reported quarterly to the Board. Responsibility for achieving individual targets is assigned to each business segment, i.e; Corporate Banking, Retail Banking, and Business Banking, and performance is regularly evaluated by the respective Heads of these units.
Metrics for monitoring progress	Value of green finance facilitated in LKR, Number of facilities
Revision	Reviewing the progress, as required
Progress achieved during the year and status at the year end	LKR 19.35 Bn as at 31 December 2025, representing pure SLGFT compliant lending