5292019 Universal registration document and annual financial report - BNP PARIBAS

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

United Nations Global Compact, the World Resources Institute (WRI) and the WWF, and supports companies willing to set environmental objectives that are in line with the Paris Agreement. As the SBTi has not yet determined any methodology to set objectives for financial sector companies, BNP Paribas is participating in the working groups set up to develop such a methodology;

■ signed the Katowice Commitment in 2018, and the Collective Commitment to Climate Action in September 2019 under the auspices of UNEP FI. The Group has therefore committed to developing tools which will bring its credit portfolio into line with the objectives of the Paris Agreement.

As such, in 2019, BNP Paribas tested the methodology developed by the think tank, 2 Degrees Investing Initiative. This methodology calculates the profile of the credit portfolio at various maturity dates for five highly carbon-intensive sectors (fossil energy extraction, electricity generation, transportation, steel and cement). The method is adapted for each sector and the reference scenarios used are developed by independent organisations, such as the International Energy Agency (IEA). For electricity generation, fossil fuel extraction and automobiles, the approach is based on energy or technological mix. For aviation, cement and steel, carbon emission intensities are analysed.

Following this initial testing phase, work has been undertaken with the signatory banks of the Katowice Commitment, in order to test and propose areas for improvement to the common methodology developed by the 2 Degrees Investing Initiative . Indeed, BNP Paribas seeks to play an active role in the joint creation of a methodological tool which will later be widely shared with various stakeholders.

Initial testing of the methodology covered a significant percentage of clients in each sector (more than 80% of outstandings). The results of this test give an overview of the client portfolio with a reference scenario at a given date and an estimation of what this same portfolio will be in five years time. The compatibility of the credit portfolio with a 2°C scenario will be achieved by dynamic portfolio management and exogenous technological developments. The purpose of the Group s work is to improve the percentage and quality of its client coverage, and to better understand the anticipated changes in each sector.

Finally, in December 2019, BNP Paribas signed the Poseidon Principles(1), which promote decarbonisation in the shipping industry by incorporating climate considerations into banking portfolios and credit decisions. The purpose of the Principles is to meet the ambition of the International Maritime Organization (IMO) to reduce shipping s greenhouse gas emissions by at least 50% by 2050, in comparison with 2008. They will provide the tools to measure and manage the CO2 intensities of shipping financing portfolios based on a common methodology for all signatory banks.

Electricity and energy mixes financed have less carbon than the world mix

In accordance with its commitment to finance the energy sector in line with the 2°C scenario of the International Energy Agency (IEA), BNP Paribas has significantly reduced its support for fossil fuels: coal, unconventional oil and gas.

In 2018, the Bank therefore stopped supporting companies whose primary business is exploration, production and export of gas/oil from shale, oil from tar sands or gas/oil production in the Arctic.

418 companies worldwide were placed on the exclusion and monitoring list in 2019 because of the Group s sector-specific energy policies.

BNP Paribas toughened its stance on coal in 2019, announcing in November its goal of reducing its exposure to the coal industry to zero by 2030 in countries within the European Union and by 2040 for the rest of the world. In order to achieve this objective, the Bank will ramp up discussions with its corporate clients which produce some of their electricity from coal, analysing to what extent their development paths are aligned to the Group s objectives of withdrawing from the sector by geographical area. The Group will then start cutting ties with producers planning new coal-based electricity production capacity.

These decisions are naturally reflected in the electricity mix and the energy mix that the Group finances. In the context of measuring its indirect emissions (scope 3) BNP Paribas has since 2014 communicated the breakdown of primary energy mix (fossil fuel extraction) and secondary energy mix (electricity generation) financed and has committed to ensuring they evolve in line with the 2°C scenario of the IEA. By way of example, the coal share in the energy mix has been in continual decline since 2017.

➤ COAL SHARE IN THE ENERGY MIX

2010 2014 2016 20202012 2018 2022 2024 2026 2028 2030

IEA achieved IEA SDS scenario

BNP Paribas: carried out up to 2019 BNP Paribas: extrapolated

0%

10%

20%

30%

40%

50%

(1) https://www.poseidonprinciples.org/.