Greenhouse gas emissions and climate protection

Relevance of the topic

Curbing and adapting to climate change are among the greatest challenges the world currently faces. LUKB is aware that combating climate change demands a concerted effort from all actors.

The business activities of a bank also cause greenhouse gas emissions. On the one hand, such emissions are generated directly during its own business operations, such as heating its premises, making trips in company vehicles or purchasing electricity and heat from district heating plants.

On the other hand, most emissions are generated indirectly through financing for private individuals, companies and other organisations as well as through the investment of customer funds and own bank assets. For example, the buildings and companies that LUKB finances cause emissions. However, companies and countries that LUKB or its clients invest in also contribute to emissions. In the financial sector, these indirect emissions are referred to as ‘financed emissions’ in accordance with the international standards of the Partnership for Carbon Accounting Financials (PCAF)¹⁾.

Climate change entails both risks and opportunities for banks. Risks include physical damage from floods, storms, heat waves, etc. as well as transition risks, which can arise, for example, from new legal or regulatory requirements. Climate change also contributes to the loss of biodiversity, another potentially significant risk factor for the global economy.

As in the previous year, reporting on LUKB's climate-related risks and opportunities in this Sustainability Report is based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)²⁾. The requirements of the Ordinance on Climate Disclosures are thus implemented.

This report on greenhouse gas emissions and climate protection also forms the basis for climate reporting to the Canton of Lucerne (the majority shareholder of LUKB) in line with its 2025 Ownership Strategy³⁾.

Principle

LUKB contributes to climate protection by pursuing net-zero targets. Priority is given to reducing greenhouse gas emissions in its own operations and along the value chain. In the second place, unavoidable emissions are to be offset on the market through compensation measures (climate protection projects to remove CO₂ from the atmosphere, also known as negative emission approaches).

LUKB periodically assesses all risk categories throughout the Group. This also includes climate-related financial risks, which are treated as drivers for the risk categories of default, market, liquidity, operational, compliance, strategic and reputational risks and therefore form part of LUKB's systematic risk management.

Targets

Net-zero target by 2050

LUKB remains committed to the net-zero target for 2050 in line with:

• The climate strategy of the Swiss federal government and the Canton of Lucerne to implement the Paris Agreement, which Switzerland ratified in October 2017
• The Climate and Innovation Act (CIA), which Swiss voters adopted on 18 June 2023
• The requirements of the 2025 LUKB Ownership Strategy of the Canton of Lucerne, which were derived from the cantonal government's own climate strategy¹⁾

Progress towards reaching these targets depends on various factors, which are partly outside the sphere of influence of LUKB. A key prerequisite here is the decarbonisation of the economy over the coming years. LUKB relies on the necessary political frameworks being put in place and on significant progress being made in the near future with processes and technologies that prevent and remove emissions. The uncertainties include macroeconomic developments, such as the effect of the economy and interest rates on the financial situation and thus on the affordability of decarbonisation measures by property owners and companies.

Scope 1 and Scope 2 of the net-zero target in 2030

In addition, LUKB aims to reach the net-zero target as early as 2030 with regard to its direct greenhouse gas emissions (Scope 1) and its indirect energy-related greenhouse gas emissions (Scope 2). The main means of achieving this will be a range of measures to further reduce Scope 1 and Scope 2 emissions. Secondly, residual greenhouse gas emissions should be offset.

Further interim targets are described in ‘Climate strategy/climate transition plan‘ in this section.

Status in 2025

Greenhouse gas balance sheet

LUKB prepares an annual balance sheet of its greenhouse gas emissions (‘GHG emissions‘). It shows the effectiveness of the measures taken and includes the following emissions:

• Scope 1 emissions: direct greenhouse gas emissions
• Scope 2 emissions: indirect energy-related greenhouse gas emissions
• Scope 3 emissions: other indirect greenhouse gas emissions that occur upstream or downstream along LUKB's value chain that include operational greenhouse gas emissions (e.g. due to employee business trips and commutes) as well as financed emissions caused elsewhere by LUKB's financing and investment activities

With the exception of financed emissions, the GHG balance sheet is prepared according to the industry standard ‘VfU key figures’ of the Verein für Umweltmanagement und Nachhaltigkeit in Finanzinstituten e.V.¹⁾, which uses the international standards of the Greenhouse Gas Protocol (GHG Protocol)²⁾.

Financed emissions are calculated and disclosed in accordance with the approaches of the industry standard of the Partnership for Carbon Accounting Financials (PCAF)³⁾ relevant to LUKB. LUKB joined the PCAF initiative in 2023 and is working with the PCAF and other PCAF member banks to improve its data quality, calculation methods and disclosure.

In accordance with the requirements of the GHG Protocol, LUKB has defined criteria to ensure the consistency and comparability of its GHG footprints over time. Historical emissions are recalculated if structural changes or methodological adjustments are made or if significant errors become known. Materiality principles are used to determine whether an adjustment to the base year or other historical emission values is needed.

GHG emissions are reported in terms of CO₂ equivalents (CO₂e), a unit of measurement for greenhouse gas comparability. The unit of measurement combines the different greenhouse gases in a common unit based on their Global Warming Potential (GWP) compared to carbon dioxide (CO₂). According to the GHG Protocol, 1 tCO₂e is the amount of a greenhouse gas that has the same warming effect as 1 tonne of CO₂ over a century.

The carbon footprint covers all locations within the Group.

Scope 1 and Scope 2 GHG emissions

LUKB's Scope 1 emissions are mainly caused by the oil and gas for heating its premises as well as by the fossil fuels for its vehicles and coolants.

The Scope 2 emissions mainly relate to the purchase of district heating, which means LUKB calculates the GHG emissions generated by external energy producers and suppliers pro rata as Scope 2 emissions in accordance with the GHG Protocol. All the electricity that LUKB purchases comes from renewable energy sources.

Numerous factors affect the level of greenhouse gas emissions. Significant examples here are the number of heating degree days, increase in employee numbers and changes in the use of building space and the interior design (e.g. a result of advances in digitalisation).

LUKB is well on the way to reaching its 2030 net-zero target for Scope 1 and Scope 2 greenhouse gas emissions.

Scope 1 emissions 385 tonnes of CO₂ equivalents (tCO₂e) in total in 2025, compared with 476 tCO₂e in the previous year. This corresponds to a 19 % reduction compared to the previous year and a 61 % reduction compared to 2014. The further year-on-year decline is mainly due to progress in the fossil-free heat supply of business premises. LUKB's head office in Lucerne currently still has gas heating and thus causes the most Scope 1 emissions. The switch to district heating has been planned for some time now. Project implementation has been delayed by the energy supplier and is now scheduled for the 2026/27 heating period.

Scope 2 emissions remained roughly constant year-on-year at 22 tCO₂e. The increase from 7 tCO₂e in 2014 to 22 tCO₂e in 2025 is mainly due to the switch from fossil heating to district heating at various locations, which significantly reduced Scope 1emissions (see above), but increased Scope 2 emissions to a much lesser extent.

LUKB has cut its Scope 1 and Scope 2 greenhouse gas emissions by 59 % overall since 2014. It has done so mainly by switching to fossil-free heating, installing solar panels and implementing a range of energy-saving measures. This reduction was possible without purchasing climate offsets (‘CO₂ certificates’).

Except in the case of flights and print orders, LUKB does not currently use any comprehensive offsetting solutions. However, it actively monitors the market for negative emission approaches and has regular contact with various providers of corresponding solutions.

The following table shows the trend in Scope 1 and Scope 2 greenhouse gas emissions since 2014:

Trend in Scope 1 and Scope 2 greenhouse gas emissions since 2014:

Scope 3 greenhouse gas emissions

Scope 3 emissions include other indirect greenhouse gas emissions that occur upstream or downstream in LUKB's value chain. They are mainly financed emissions (Category 15 of the Greenhouse Gas Protocol). Measured in terms of their volume, other Scope 3 emissions are much less significant than financed emissions.

The table below lists the other Scope 3 GHG emissions for 2023 (base year), 2024 and 2025. The ‘Financed emissions’ in Category 15 can be found in tables further on.

Category 1 – Paper: Total year-on-year paper consumption fell by 22 % and total envelope consumption by 9 % – see information about material consumption under ‘Procurement and waste disposal’ in the ‘Other topics’ section.

Category 3 – Energy and fuel-related activities: This item includes emissions from energy use, preliminary stages relating to power plants as well as losses from distribution and conversion. These emissions have decreased slightly year-on-year.

Category 7 – Commuting and working from home: The increase in emissions from commuting is solely attributable to the increase in average full-time employee numbers from 1,106.4 in 2023, to 1,160.0 in 2024, and to 1,191.7 in 2025. The underlying mobility behaviour over the three years is based on the same employee survey. Emissions from working from home are calculated using estimates that are also based on this survey. The next employee survey on mobility behaviour will be conducted in 2026.

Category 13 – Leased residential and business premises:  Emissions have fallen by 46 % since 2023 as a result of switching from fossil heating to district heating and heat pumps.

Apart from emissions in Category 15 (‘Financed emissions’; see section below), other Scope 3 emissions are of minor importance at LUKB.

Scope 3 greenhouse gas emissions – financed emissions

Lending business

LUKB uses the international Partnership for Carbon Accounting Financials (PCAF) standard when calculating and disclosing financed emissions from its lending business. In this connection, it applies the PCAF standards for mortgages on residences and commercial real estate and for business loans. LUKB has defined these three lending portfolios as follows in accordance with the PCAF requirements:

The definitions of the three portfolios differ from those LUKB normally uses for these types of lending.

As at 31 December 2025, the three portfolios accounted for 93 % of all loans to clients. No PCAF calculation standards currently apply to the remaining 7 % of loans to clients (including loans for building land, public-sector loans and Lombard loans).

The following table shows the emissions for the three lending portfolios:

LUKB aims to reduce the CO₂ intensity in relation to the energy reference area (kgCO₂e/m² ERA) by 40 % in its residential and commercial mortgages portfolios by 2030 compared with the base year 2023 (see the ‘Climate strategy/climate transition plan’ section). The degree of target achievement by the end of 2025 is shown below:

The CO₂ emissions reported for mortgages are mainly based on publicly available information on the condition of the building from the Register of Buildings and Dwellings (RBD). Complete data on the energy efficiency of the financed buildings – e.g. renovations of façades, windows, roofs and basement ceilings – is currently lacking, and information about heating systems is often out of date. On a positive note, Canton Lucerne and its municipalities have intensified their updating of RBD data, which should further improve data quality in future.

An overview of the energy efficiency of the financed buildings based on the available data can be found in ‘Energy efficiency of financed buildings’ in the ‘Lending business’ section.

To enable more realistic emission estimates, LUKB has worked with a Swiss data service provider specialising in real estate to develop a model based on the federal government's PACTA climate compatibility test. The model takes into account the years of construction of the buildings and life cycles of components and assumes that renovation and replacement investments have been or will be made. Cantonal statutory requirements for renovations and assumptions for switching to climate-friendly heating systems are also included in the model. The values the model generates are used for validating the calculations internally and provide the basis for further measures.

The lending portfolio by emission-intensive sectors breaks down as follows:

Financial assets

The financial asset portfolio consists predominantly of bonds with the highest liquidity level that qualify as high-quality liquid assets (HQLA). Bond issuers can largely be attributed to the financial sector.

Investments

The year-on-year increase in GHG emissions is due to the increased availability of Scope 3 emissions data for an investment.

Own investment funds (LUKB Expert Fund)

Portfolio management (standard and individual mandates)

Climate compatibility tests

In 2024, the Federal Office for the Environment (FOEN) carried out the climate compatibility test for the Swiss financial centre for the fourth time in collaboration with the State Secretariat for International Finance (SIF). The standardised Paris Agreement Capital Transition Assessment (PACTA) method was again applied in the 2024 test. The test is intended to show how climate friendly the portfolios are of the participating Swiss financial institutions. The previous tests were conducted in 2017, 2020 and 2022. Participation in 2024 was once again voluntary for the financial institutions. LUKB took part for the third time in 2024. A total of 146 institutions from the financial sector took part, including 34 banks.

The 2024 evaluation consisted of two quantitative modules and one qualitative survey. One quantitative module analysed exposure to listed equities and corporate bonds in climate-relevant sectors and assessed their alignment with global climate scenarios. The other quantitative module assessed the compliance of Swiss real estate and mortgage portfolios with national climate targets. The qualitative survey covered additional climate-relevant strategies and activities in the different business areas of the participating financial institutions.

No climate compatibility test was carried out in 2025.

Risks and opportunities

As in the previous year, LUKB follows the recommendations of the former Task Force on Climate-related Financial Disclosures (TCFD)¹⁾ for the next section of the report on the risks and opportunities of climate change.

Climate-related risks

Climate-related risks are part and parcel of LUKB's Group-wide risk management. Over the past two years, key basic documents have been drawn up to determine the organisational, methodological, procedural and governance procedures for managing climate-related risks.

LUKB does not regard climate risks as an additional category but as a risk driver. It influences the default, market, liquidity, operational, compliance, strategic and reputational risk categories through various potential events.

To identify and assess these effects, LUKB compiled a comprehensive risk inventory of climate risks in 2024, which it expanded and updated in 2025. The risk assessment distinguishes between physical and transition climate risks in accordance with the TCFD recommendations.

Physical climate risks

Physical risks result from the physical effects of climate change and the associated impairment of ecosystem services. Physical risks can be acute or chronic or both. Acute physical risks result from extreme events such as floods, storms, droughts, wildfires, landslides and pandemics. Chronic physical risks result from permanent natural changes such as rising average temperatures, changes in precipitation patterns, rising sea levels, pollution of air, water or soil; deforestation, species extinction, and the spread of invasive species.

Transition climate risks

Transition climate risks, also known as transition risks, arise from switching to a climate-friendly economy – in particular in connection with decarbonisation, e.g. through changes in climate and environmental policy, technological developments, revision of laws, and changes in the behaviour of market participants.

The long-term nature of climate change makes distinguishing between different timescales especially important when assessing risk. LUKB has assessed its climate-related financial risks based on the following timescales:

• Short term: 0 to 4 years
• Medium term: 5 to 15 years
• Long term: 16 to 30 years

According to its current assessment, LUKB expects the risks associated with climate change to have only a limited effect on its business and financial performance. The effects of climate change depend heavily on the business model. In line with the Canton of Lucerne's Ownership Strategy, LUKB acts as a full-service bank, primarily for the people and economy of the Canton of Lucerne. Geographically, its activities are limited to Switzerland. Only a few clients are domiciled abroad. LUKB's income and financial risks are broadly diversified.

The table below shows the assessment made in 2025 of the short-, medium- and long-term effects of climate-related risks on LUKB:

There are currently no high risks in the climate risk inventory. The risk analyses indicate a low climate-related risk for LUKB in the short term. This applies to both transition and physical risks. In the medium to long term, however, LUKB expects climate-related risks to become more important, primarily with regard to the potential effects of climate change on default risks. Compared to other non-climate-related risks and measured against LUKB's own funds; however, these climate-related risks are also currently rated as relatively low.

Effects of physical risks on default risks

Physical risks may cause the value of loan collateral (e.g. for mortgages, the value of financed properties) and/or the affordability of financing costs to decrease. For example, a higher risk of flooding can negatively effect the value of property in an area. A flood can also result in high repair costs. Businesses can suffer a loss of income due to business interruptions and supply chain issues.

In addition to these microeconomic effects, macroeconomic effects are also a possibility. Higher physical risks can, for example, weaken the economy and influence supply and demand in the markets.

In terms of value, the majority of the properties financed by LUKB are located in the Canton of Lucerne and in neighbouring regions of the Swiss Plateau. By comparison, the proportion of financed properties in mountain regions that are particularly affected by physical risks (e.g. due to landslides and rockfalls) is low.

Building damage caused by natural hazards (e.g. floods, storms, landslides, rockfalls) is covered by mandatory building insurance in most cantons in Switzerland. In cantons without mandatory building insurance, LUKB requires similar cover from private insurers. As long as insurance premiums do not rise sharply, acute physical risks should therefore not have a significant effect on the value of buildings and the affordability of mortgages. In addition, Switzerland's building and zoning regulations ensure that construction is not generally carried out in areas at high risk.

In 2025, LUKB calculated the effects of a flood scenario on the mortgage portfolio based on the cantonal flood hazard maps (intensity maps). This quantitative analysis examined the effect on the value of the collateral and the need for specific value adjustments:

acute physical consequences of climate change (e.g. floods, storms, landslides) can cause damage to company buildings and equipment and lead to business interruptions. Such events are usually geographically limited, meaning that only a small part of LUKB's lending portfolio would be affected. In addition, business interruption insurance (if any) would mitigate the risks.

Chronic developments (e.g. water scarcity, soil degradation and biodiversity loss) can put clients' business models at risk. LUKB does not expect any significant effect on its business lending portfolio in the short to medium term. Based on its current assessment, LUKB does not anticipate any significant risks in the longer term either, as it does not have a particularly high proportion of financing in potentially more heavily affected sectors and its lending portfolio is broadly diversified.

Overall, LUKB does not expect any significant increase in loan defaults due to physical risks in the short to medium term. In the long term, climate risks could become more important due to rising insurance premiums and potential real estate depreciation. However, based on the current assessment, these developments are unlikely to have any material effect on LUKB's lending portfolio. LUKB will monitor further developments in this area and take action early on as needed.

Effect of transition risks on default risks

Like physical climate risks, transition climate risks can also affect credit risks. Examples include the depreciation of properties heated using fossil fuels or higher operating costs due to rising CO₂ taxes or energy prices. Companies may need to adapt their business activities and production processes, which involves a high level of investment. Without these adjustments, assets may lose value. In this respect, the transition to a low-emission economy can have a significant effect on the profitability of companies.

Rising carbon taxes and energy prices can lead to lower sales and/or higher operating costs, which can result in collateral depreciation and loan defaults. However, simulations of such scenarios show that LUKB would be able to manage these effects well – even if CO2 taxes were to rise sharply. LUKB only has low lending volumes in emission-intensive sectors (see table above in the ‘Scope 3 greenhouse gas emissions – financed emissions’ section). As a result, rising taxes on greenhouse gas emissions have only a moderate effect on credit default risk for most corporate clients. Even if there are sharp price increases, the simulations do not show any significant effect on the lending portfolio.

in 2025, LUKB again calculated a scenario of a significant increase in CO₂ taxes over the next five years. It based it on the updated scenarios of the Network for Greening the Financial System (NGFS) – an association of central banks and supervisory authorities that analyses the effects of climate change on the global financial system. Since last year's scenario analysis, these scenarios have been significantly refined. For the following quantitative analysis, LUKB used the new assumptions and examined the effect on the creditworthiness of the financed companies, the value of the mortgage guarantees and the need for specific valuation allowances in the loan portfolio:

LUKB also assumes that restrictive climate-related laws and regulations with an abrupt effect on lending are unlikely in the Swiss political system, in which direct democracy is a key element. Under the rule of law in Switzerland, political decisions are made in close consultation with stakeholders. Such processes are generally designed so that the economy and society can adapt to major changes and that appropriate hardship measures are implemented in particularly serious cases. As a result, significant defaults of mortgage and corporate clients due to new, abrupt regulatory changes are unlikely.

LUKB also assessed any technological risks arising from climate change. LUKB expects innovation cycles for corporate clients to become even shorter in the future, leaving less time for companies to react. The risk driver could potentially present affected companies with challenges that threaten their very existence. However, LUKB does not expect any significant effects on its default risks in the longer term either, as it assumes that this risk only affects part of its lending portfolio and that LUKB has a broadly diversified business lending portfolio. LUKB will also closely monitor further developments in this area and take action early on where necessary.

Overall, LUKB does not expect any significant increase in loan defaults over any timescale due to transition risks.

Effect on market risks

Market risk refers to the loss potential resulting from unfavourable changes in interest rates, share prices, foreign exchange and cryptocurrency rates and real estate prices as well as other relevant market parameters such as volatilities. Market risks are present in both LUKB's banking and trading books. Physical and transition risks can lead to unexpected changes in these market parameters and thus influence market risk.

LUKB invests its financial assets mainly in Swiss mortgage bonds and bonds issued by public-sector borrowers. These companies are less affected by market risks than, for example, companies in emission-intensive sectors. The effects of climate-related risks on market risks affecting the financial asset portfolio is therefore limited for LUKB.

Market risks in the trading book are significantly limited by short holding periods, appropriate volume and risk limits and corresponding hedging transactions. As a result, the effects of climate change on market risks in the trading book is low.

Effect on operational risks

Transition risks in banking operations

Increasing awareness of climate issues and new legal and regulatory requirements place additional demands on LUKB, for example in terms of data collection, reporting and advisory services. This increases LUKB's operational risk, particularly as a result of growing compliance risks. LUKB therefore has an ongoing interest in the development of legal and regulatory requirements and, if necessary, adapts its internal requirements and climate risk management. Overall, LUKB classifies the risks as low.

Physical risks for banking operations

Climate change increases operational risks due to physical events such as flooding, which can cause damage to the Bank's buildings or critical infrastructure. All buildings that LUKB uses for its operations are located in Switzerland and have standard building insurance cover. LUKB also takes physical measures to protect itself (e.g. against floods). Unavoidable risks are largely insured.

Operational risk management and business continuity management (BCM) ensure that LUKB can maintain business-critical processes even in extraordinary situations, minimise potential damage and ensure that operations are resumed quickly in the event of an emergency.

Overall, LUKB believes its operations have little exposure to climate risks.

Effect on other risks

Other risks include, in particular, strategic and reputational risks. Due to its business model, LUKB considers the strategic risks posed by climate change to be low. As awareness among the general public, clients and other stakeholders increases, expectations of sustainable business practice grow. This also increases the risk of reputational damage. Sustainability therefore is a key element of LUKB's strategy. As LUKB attaches great importance to sustainability and provides transparent information; it considers the overall reputational risk to be low.

Climate-related opportunities

In accordance with the TCFD recommendations, LUKB distinguishes among five categories of opportunities: markets, products and services, resource efficiency, energy sources, and resilience.

Markets, products and services

Climate change is associated with a high level of investment needed to finance the transition to a more climate-friendly economy and society. In the building sector, for example, significant further investments must be made in renovating the building envelope and replacing the heating system. It can therefore be assumed that demand from property owners and companies for financing to improve climate compatibility will continue to increase in the future to meet Switzerland's climate targets. This opens up opportunities to support clients with such financing projects.

LUKB already supports real estate clients with measures to preserve long-term value and improve the energy efficiency of real estate. An overview of LUKB's approach and the corresponding products and services can be found in the ‘Lending business’ section.

In addition, LUKB already responded to clients' need for sustainable investment and pension products in 2022 and systematically aligned its investment and fund business with sustainability criteria (ESG criteria; environment, social, governance). An overview of the products and services can be found in the ‘Investment business’ section.

Resource efficiency

LUKB's aim is to use natural resources carefully and efficiently in its banking operations and to gradually reduce the potential negative effect on the environment as far as possible, thereby also cutting costs. As banking operations are not particularly energy intensive, the effect of this opportunity on the Bank's financial results is considered to be relatively low.

An overview of the measures in the area of energy efficiency can be found below. In addition, ‘Procurement and waste disposal’ in the ‘Other topics’ section has further information on measures relating to waste as well as material and water consumption.

Energy sources

Sustainable and renewable energy sources enable LUKB to cut both operational emissions and costs. It already obtains all of its electricity from renewable energy sources and produces energy from solar panels at various business locations. In the coming years it plans to further expand its electricity production potential (see the explanations below).

Resilience

By taking a conscious approach to climate change, LUKB can take preventative measures to strengthen its resilience in the long term. Sustainability and climate change are firmly embedded in the corporate strategy. Integrating climate-related financial risks into risk management also increases resilience. As the market leader in the Lucerne economic region and as a major employer, LUKB is aware of its responsibility and acts proactively and with a focus on the future as a result.

Risk management

As a financial institution, LUKB is confronted with various bank-specific risks: these include default, market, liquidity, operational, compliance, strategic and reputational risks. Sustainability risks and their climate-related financial risks are not a standalone risk category but rather a driver of these risk categories.

The ‘Risk management’ section in the notes to the Group financial report contains further information about the risk policy, the organisation and governance of risk management, the individual risk categories and how risks are managed.

Every year the Risk Control function, together with an expert committee from the first line of defence, carries out a qualitative assessment of the effects of climate risks as drivers for the risk categories default, market, liquidity, operational, compliance, strategy and reputational risks. The first-line-of-defence expert committee consists of the Sustainability Office, Credit Risk Management, Finance & Investment Management Support and the Asset Management Sustainability Office.

The overall risk management process with regard to climate risks at LUKB is as follows:

a) Identification

This process step involves identifying climate-related physical and transition risks. Physical and transition climate risks are explained in the section above.

The aim of this step is to identify and understand the potential risks to which LUKB is exposed. This step takes into account, among other things, developments in the environment, politics, regulation, technology and markets.

The individual risks are documented in a risk inventory.

b) Measurement and assessment

The aim of this process step is to assess the effects of climate change on LUKB's risk profile. The evaluation is mainly qualitative. First of all, possible transmission channels for individual risks are assessed, such as property damage, loss of income, additional expenses, changes in assets and market changes.

On this basis, the materiality of the risks is assessed, taking into account risk exposures. The sources of income and expenses, assets and possible risk mitigations (e.g. insurance policies, behaviour of stakeholders, public-sector measures) are taken into account. Finally, the extent of the effect on the defined risk categories and their sub-categories is assessed. Risk assessment classes (‘materiality levels‘) are defined and applied for this purpose.

For specific portfolios with increased risk exposure to climate-related financial risks, quantitative scenario analyses are carried out periodically where possible and appropriate.

c) Management

Risk management aims to steer and manage climate risks effectively and efficiently throughout the Group. The risk management measures are defined and implemented by the respective risk owners within the existing risk categories.

As climate risks are currently classified as low (‘low’ to ‘medium’ according to LUKB's climate risk inventory; see the explanations above), no need for additional measures beyond the current ones was identified in the 2025 financial year.

d) Control and reporting

The risk assessment is updated at least once a year by the Risk Control function in collaboration with the above-mentioned first-line-of-defence expert committee.

In its quarterly internal risk report, the Risk Control function reports on the risk situation, compliance with risk tolerance and compliance with limits in all risk categories to the Executive Board, the Risk and Strategy Committee of the Board of Directors and the Board of Directors. An analysis of the identified climate-related financial risks is added to the internal risk report at least once a year and submitted to the Executive Board and the Risk and Strategy Committee of the Board of Directors. Further details on reporting can be found in the ‘Managing sustainability’ section.

Further developments

FINMA data collection 2025

LUKB falls within FINMA supervisory Category 3. In 2025, FINMA conducted another survey on climate-related financial risks for institutions in Categories 1 to 3. This included a comprehensive data collection as at 31 December 2024 (quantitative part) and a supplementary questionnaire (qualitative part). The survey served as the basis for FINMA's report on climate risks, which was published in the FINMA Risk Monitor 2025¹⁾ in November 2025.

FINMA Circular 2026/01 ‘Nature-related financial risks’

In December 2024, FINMA published Circular 2026/01 ‘Nature-related financial risks’¹⁾. It specifies the requirements for risk management, internal documentation, and the internal control system with regard to climate- and other nature-related financial risks. As a FINMA Category 3 institution, LUKB is currently implementing these requirements.

Climate strategy / climate transition plan

The Federal Council's Climate Reporting Ordinance, based on Article 964a et seq. of the CO (section on non-financial reporting), requires the preparation and publication of a climate roadmap (known as the ‘transition plan) that is comparable to the Swiss climate targets. It is designed to set the targets and measures with which the reporting company contributes to climate protection.

LUKB's climate transition plan is an integral part of its sustainability strategy and is in line with its overall strategy. It includes specific and time-bound targets as well as measures for the transition to the net-zero target by 2050 in accordance with the requirements of the Climate and Innovation Act (CIA) and the climate strategy of the Canton of Lucerne.

The transition plan was approved by the LUKB Board of Directors in 2024. The Executive Board is responsible for its implementation. The Board of Directors' Risk and Strategy Committee reviews and updates the transition plan at least once a year, most recently in the fourth quarter of 2025 as part of internal sustainability reporting. The climate transition plan is published annually in the Sustainability Report and appeared for the first time in 2024.

Defining and implementing the transition plan comes with risks and uncertainties. Progress towards reaching these targets depends on various factors, which are partly outside the sphere of influence of LUKB. A key prerequisite here is the decarbonisation of the economy over the coming years. LUKB is reliant on the necessary political framework conditions being put in place and further significant progress being made in the next few years with processes and technologies that prevent and remove emissions.

The uncertainties include macroeconomic trends, such as the effects of the economy and interest rates on the financial situation and thus on the affordability of decarbonisation measures by property owners and companies. Changes in climate policy or in laws and regulations may require adjustments to the transition plan. Another uncertainty relates to the greenhouse gas balance sheet on which the transition plan is based. It is currently still largely based on assumptions (see the explanations provided above). LUKB aims to create a better data basis by continuously improving data quality.

Targets

LUKB has set itself the following greenhouse gas targets:

Net-zero target 2050 in line with the Climate Strategy of the Federal Government and Canton Lucerne as well as the Climate and Innovation Act.

Interim targets

The 2030 net-zero target for Scope 1 and Scope 2 emissions also meets the requirements of the Canton of Lucerne (majority shareholder of LUKB) in the 2025 Ownership Strategy (cantonal expectation: net-zero by 2040 for Scope 1).

For the time being, LUKB refrains from publishing explicit quantitative interim targets for Scope 3 emissions of the business loan portfolio, as the majority of emissions can, due to a lack of more precise data, currently be calculated only by using sector-based assumptions. At present, relatively few companies still publish data on their greenhouse gas emissions. LUKB also has a relatively small share of business loans in emission-intensive sectors (see the ‘Scope 3 greenhouse gas emissions – financed emissions’ section). LUKB grants loans only to companies that have their registered office in Switzerland and are subject to the binding sector-specific indicative targets for greenhouse gas reduction by 2040 and the net-zero target for 2050 in accordance with the Climate and Innovation Act (Art. 4 and 5 CIA) (indicative targets: Buildings sector: –82 % by 2040, –100 % by 2050; transport sector: –57 % by 2040, –100 % by 2050; industry sector: –50 % by 2040, –90 % by 2050). LUKB is therefore guided by these indicative targets.

Action areas and measures

LUKB has defined the following six action areas and derived specific measures from these:

The following pages describe the status of the individual action areas and measures.

Action Area 1: Replace heating in own properties with fossil-free alternatives

Customer proximity is a key element of the LUKB business model. For this reason, to serve its clients in person LUKB operates a close network of branches at 22 locations in the Canton of Lucerne and one in Zurich, with two sales offices in French- and Italian-speaking Switzerland (Lausanne and Lugano, respectively). In addition, the Bank offers a major share of its services 24/7 via electronic channels such as the lukb.ch website and its app for smartphones.

The following map shows LUKB properties as at 31 December 2025, distinguished by ownership structure:

LUKB wholly owns 17 buildings and partially owns six as condominiums. The remaining branch offices are in leased premises. In most cases, LUKB properties are either classic bank buildings or mixed-use real estate.

In addition to its automated banks at Grendelstrasse (Lucerne), at the Schönbühl Centre (Lucerne), the Emmen Centre (Emmenbrücke), the Mall of Switzerland (Ebikon), in Sursee Oberstadt and in the Surseepark (Sursee), LUKB has a dense network of ATMs throughout the canton. LUKB rents the space it requires for these ATM locations.

Action Area 1 of this part of the report does not cover any rented space. The following describes the measures taken by LUKB for each sphere of action.

Measure 1.1: Conversion of heating systems in own properties to fossil-free operation by 2025 (if possible given planning regulations)

For historical reasons, most LUKB properties are heated with fossil fuels. LUKB has been working since 2014 towards running its own properties fossil-free by 2025.

Status of wholly owned LUKB properties as at 31 December 2025:

Among other things, there are plans for 2026/27 for the existing energy supplier to switch from fossil fuel-based energy to lake water for the head office and two other locations in the city of Lucerne. LUKB also intends to realise the METROPOOL project at Seetalplatz in Emmenbrücke over the next few years (building permit not yet legally binding as of 31 December 2025). LUKB will be able to make further greenhouse gas savings when this Minergie®-certified building has been completed.

Measure 1.2: Buildings not wholly owned by LUKB will be assessed to determine whether heating systems might be run on renewable energies by 2025

LUKB actively fulfils its responsibility as condominium owner and is a vocal advocate of replacing fossil energies with renewables.

Status of properties in condominium ownership as at 31 December 2025:

LUKB remains with the above targets for buildings it owns fully or as condominiums over the next few years and is pursuing their implementation consistently. An alternative version is being developed for the Grendelstrasse 5 location in Lucerne.

Action Area 2: Make energy savings and expand renewable energies

At present, producing and consuming electrical energy contributes to the pollution of the environment and climate in Switzerland. This is primarily due to the use of fossil fuels such as coal, oil or gas to generate power. The exploration of renewable sources of energy may also conflict with the environment, natural world and countryside conservation, however. With this in mind, LUKB has defined a series of measures for a sustainable energy policy.

Action Area 2.1: Energy savings

Measure 2.1.1: Reduce energy consumption both at company level and per employee

LUKB has set itself the goal of steadily reducing its energy consumption. This overall target relates to both power use in general and building energy (electricity, gas/oil, other fuels) in particular. The power required by LUKB's buildings is heavily weather-dependent.

The trend in LUKB's total energy consumption is as follows: