2020 Universal registration document and annual financial report - BNP PARIBAS566

7 a Committed Bank: information ConCerninG the eConomiC, soCial, CiviC and environmental resPonsiBility of BnP PariBas

7

Our economic responsibility: financing the economy in an ethical manner

To encourage ESG best practices in the firms in which the management company and its clients have invested, BNP Paribas Asset Management routinely exercises its shareholder voting rights, voting on 24,400 resolutions at 1,870 General Meetings this year (22,454 resolutions at 1,758 meetings in 2019) BNP Paribas AM abstained or opposed approximately 32.3% of these resolutions (27.8% in 2019). In line with its strategy on climate change, BNP Paribas Asset Management has adapted its voting policy and reserves the right to abstain from approving the financial statements, the discharge or the re-election of Directors of companies that do not sufficiently communicate their CO2 and 2°C strategy. In 2020, BNP Paribas AM supported 93% of shareholder proposals on climate change, tabled four shareholder resolutions on climate lobbying and opposed 355 resolutions proposed by companies (election of the Board or approval of the financial statements) due to environmental or social considerations.

BNP Paribas Asset Management has been a member of the Climate Action 100+ Initiative since 2017 and, as such, regularly engages in dialogue with firms ranked among the world s top 100 greenhouse gas emitters to improve their climate change governance. The announcement made by Total in May 2020 to become carbon neutral by 2050 marks the culmination of a constructive collaboration between Total and the Climate Action 100+ coalition through a dialogue co-led by BNP Paribas Asset Management.

In addition, BNP Paribas Cardif, the Group s insurance subsidiary, published a timetable for the final exit from the coal industry in June 2020 at the latest in 2030 for the OECD and in 2040 for the rest of the world, with regard to asset management.

In addition, issuers and investment vehicles are systematically analysed with regard to ESG and carbon criteria for 93% of assets under management. Considering only securities held directly (equities, corporate bonds and government bonds), the filter concerns 100% of the assets of the general fund, which totalled EUR 127 billion at the end of December 2020.

Integration of ESG criteria into supply chain management

The Group expects its suppliers to conduct their activities in compliance with its environmental, social and governance requirements. Within its sphere of operations, the Global Strategic Sourcing (GSS) business line applies ESG criteria at several different levels.

■ On the one hand, with the inclusion of a central ESG risk mapping relating to the products or services purchased. This mapping helps identify high-risk purchasing categories according to thirteen issues related to ethics (corruption, data protection, etc.), environment (pollution, biodiversity, greenhouse gases, etc.) and social impact (human rights, working conditions, discrimination, etc.).

■ On the other hand, via ESG assessments of suppliers, carried out during the selection process. These assessments, which are based on ESG questionnaires, include confirmation by the supplier of its compliance with the principles of the BNP Paribas Responsible Procurement Charter or its local version. The Procurement Standards provide that ESG criteria account for a minimum of 5% in the assessment of calls for tender.

2,301 ESG assessments were completed in 2020 (compared with 2,717 in 2019) and nearly 900 Responsible Procurement Charters were signed by Group suppliers. In 2020, the system was completed with the launch with three other banks and a third party appraiser of an on-site audit of two categories of purchases.

MANAGEMENT AND MONITORING TOOLS FOR ESG RISKS

Restriction of activity lists

In order to identify the companies presenting the highest environmental and social risks, the Group defines and applies financing and investment policies while managing restriction of activity lists according to the level of ESG risks observed. Following their update in 2020, these lists included 1,446 companies, i.e. 1,271 companies under exclusions and 175 on the monitoring list. Companies placed on the monitoring list are subject to commitment measures by the Group to make lasting changes to their practices and reduce their ESG risks. For companies subject to exclusions, the applicable restrictions may lead either to prohibit any financing or investment relationship, or to the implementation of a specific framework. Lastly, BNP Paribas has compiled an exclusion list that clearly mentions specific goods and activities that the Group is unwilling to finance, such as tobacco. These lists are periodically updated using data supplied by customers and external sources, and by analysing the key controversies involving corporate clients accused of serious violations of environmental standards or human rights.

Transactions handled by the Group s CSR teams

In 2020, the Group s CSR teams were asked to give an expert opinion in the assessment of ESG risks for close to 2,500 complex or sensitive transactions (financing, new accounts, export support, etc.).

Operational control plan

In order to verify the strict application of ESG risk management tools, the Group has rolled out a CSR operational control plan which establishes the continuous improvement process necessary for the effective management of ESG risks. This control plan incorporates the ESG risk management systems defined by the Group as part of its application of the law on the Duty of Care. It is then rolled out across the Group s businesses and functions.