Risk assessment in accordance with the Swiss Code of Obligations (CO)

LUKB regularly carries out an appropriate assessment of all types of risk across the Group. This includes sustainability risks, which comprise potential incidents relating to environmental, social and employee matters and corporate governance. It also includes risks associated with respect for human rights and combating corruption.

LUKB does not treat sustainability risks as a standalone risk category, but as a driver of default, market, liquidity, operational, compliance, strategic and reputational risks.

The assessment incorporates both risks from its own business operations and its own products and services, as well as those that might arise in the LUKB value chain.

Systematic risk management enables LUKB to identify and manage risks at an early stage. This can have a positive impact on the Bank's earnings, financial stability and reputation, while also building trust among its different stakeholders.

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

LUKB's approaches and measures to respect human rights and combat corruption are described in the ‘Business ethics and compliance’ section.

This Sustainability Report also includes reporting on climate-related risks and opportunities in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). LUKB is thus implementing the requirements of the Federal Council's Ordinance on Climate Disclosures. Information on the four areas of governance, strategy, risk management as well as key figures and targets can be found in the ‘Managing sustainability’ and ‘Greenhouse gas emissions and climate protection’ sections. In the latter, LUKB describes in detail the climate risks it has identified and how it is handling them. As a basis for this, LUKB has incorporated climate-related risks into its Group-wide risk management. There are various basic supporting documents for this purpose that define the organisational, methodological and procedural approach as well as the governance for managing climate-related risks. In order to identify and assess the impacts of climate risks on existing risk categories, LUKB maintains a risk inventory of climate risks and has carried out further quantitative scenario analyses for the risks of a flood event or a significant increase in CO₂ emissions.

Based on its Group-wide risk assessment, LUKB classifies its sustainability risks as at 31 December 2025 with regard to environmental, social and employee matters, as well as respect for human rights and combating corruption, as insignificant overall.

LUKB pursues a long-term business policy aimed at creating a high degree of value for the people and economy of the Canton of Lucerne. As the market leader in the Lucerne economic region and a major employer, LUKB is conscious of its special responsibility and fulfils it actively, holistically and in a future-oriented manner. LUKB always ensures a balanced relationship between risk and return, and manages risk actively.

At LUKB, lending policy and activities are traditionally concentrated on Swiss-domiciled clients and primarily on the Lucerne economic region. Compliance with ethical and environmental principles is a prerequisite when LUKB lends to clients. Sustainability criteria that must be adhered to throughout the Group for all new on-balance-sheet and off-balance-sheet lending transactions apply to lending. Further information on the principles and criteria applied can be found in the ‘Lending business’ section.

In LUKB's asset management business, investment funds and standard asset management mandates are managed according to a sustainable approach. Investment advice takes sustainability preferences into account. Further information can be found in the ‘Investment business’ section.

Sustainability criteria and the use of regional suppliers and partners where possible are also considered when purchasing products and services. Further information can be found in the ‘Relations with suppliers and partners’ and ‘Other topics’ sections.

In its risk management, risk monitoring and compliance management, LUKB adheres to strict and clearly defined requirements for internal controls and due diligence checks (see in particular the ‘Business ethics and compliance’ section of this Sustainability Report and the ‘Risk management’ section of the Group Financial Report).