2020 Universal registration document and annual financial report - BNP PARIBAS 613

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A COMMITTED BANK: INFORMATION CONCERNING THE ECONOMIC, SOCIAL, CIVIC AND ENVIRONMENTAL RESPONSIBILITY OF BNP PARIBAS

Climate-related issues management summary

C. RESILIENCE OF THE GROUP S STRATEGY TO DIFFERENT CLIMATE SCENARIOS

BNP Paribas uses climate scenarios to analyse the resilience of its strategy and to measure the alignment of its portfolio with the objectives of the Paris Agreement. Since 2018, the Group has been monitoring the change in the electricity mix and the primary energy mix in its financing portfolio compared to the change of the same mixes in the IEA s(1) SDS scenario (Sustainable Development Scenario); this scenario is compatible with the global warming objective of the Paris Agreement (see paragraph Electricity, a loan portfolio aligned with the objectives of the Paris Agreement, Commitment 3). In the field of maritime transport, BNP Paribas took part in December 2020 in the first global reporting of the climate alignment scores of the banks that signed the Poseidon Principles, which is based in particular on the International Maritime organisation s emissions reduction scenario (see the box on the International Maritime organisation in the paragraph Electricity, a loan portfolio aligned with the objectives of the Paris Agreement, Commitment 3).

More generally, the Group assesses the resilience of its financing and investment portfolios to transition and physical risks, using tools adapted to the analysis of these risks (see in particular paragraphs A shared methodology to assess the alignment of the loan portfolio with the objectives of the Paris Agreement and Electricity and energy mixes are less carbon-intensive than the global mix, Commitment 3).

Finally, the Group reduces its impacts and improves its resilience to climate change in its operational scope.

In addition, BNP Paribas participates in pilot exercises on climate risk resilience organised by central banks (see the paragraph The development of climate scenario analyses, Commitment 3).

As described above, the Group has studied its physical and transition risks, relying on recognised scenarios, in particular, to assess the risks associated with various trajectories. BNP Paribas takes appropriate measures to curb these risks (for example, by discontinuing its financing for companies that derive most of their revenues from unconventional hydrocarbons, or by completely stopping its financing of the coal sector by 2030 in the European Union and the OECD area, and by 2040 for the rest of the world; see the introduction to chapter 7.2 Our economic responsibility: financing the economy in an ethical manner). On this basis, no elements were identified that could call into question the resilience of the model and the Group s strategy in the face of energy and climate issues. By committing to align its loan portfolio with the objectives of the Paris Agreement, the Bank minimises transition risks that could have significant impacts on the companies financed. These initiatives are driven by continuous improvement.

(1) IEA: International Energy Agency.

RISK MANAGEMENT: HOW BNP PARIBAS IDENTIFIES, ASSESSES AND MANAGES CLIMATE-RELATED RISKS

A. A MULTI-STAKEHOLDER PROCESS TO IDENTIFY AND ANALYSE RISKS, PARTICULARLY THOSE RELATED TO CLIMATE.

BNP Paribas maintains a dialogue with its internal and external stakeholders. This dialogue, which feeds into the materiality matrix, is the basis of the analysis of climate-related risks and opportunities; it places climate change among the Group s crucial challenges (see page 625).

B. THE CLIMATE RISK MANAGEMENT PROCESS IS BOTH SPECIFIC AND FULLY INTEGRATED INTO THE OVERALL RISK MANAGEMENT.

The businesses, the CSR Function and the Risk Function incorporate climate-related and energy transition risks into risk management on a daily basis.

In 2020, the continued strengthening of the Group s ESG system was structured within a specific multi-year programme, the ESG Action Plan (see paragraph Management of environmental, social and corporate governance risks in section 2.4 Internal Control). This programme provides in particular for a systematic ESG assessment of clients as part of the credit process, on five dimensions, one of which is dedicated to climate change. The questions asked and their weighting in the assessment will be adapted to the challenges of each business sector.

In addition, the Group has initiated work to assess the physical risks represented by its loan portfolio based on the geolocation of customer assets and their vulnerability to climate events (see paragraph Physical risk management, in Commitment 3).