5332019 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

In keeping with its ESG risk management system, BNP Paribas takes into account ESG criteria in its decision-making process, and strengthened its control of these risks in 2019. As well as being incorporated into the Know Your Customer (KYC) framework, 22 specific credit and rating policies now include ESG criteria.

Moreover, pursuant to the French Law on Duty of care, analytical grids have been tested by business lines to provide an in-depth analysis of the Bank s corporate clients operating in countries and sectors identified as sensitive for human rights and the environment. These grids are an addition to the ESG risk management system already applied by the Bank (including sector-specific policies, CSR screening and specific credit policies). Environmentally and socially sensitive countries are identified based on frameworks which the Bank has developed (see Duty of care, section 7.6). Lastly, as a second line of defence, the Risk Function ensures that extra-financial issues are taken into account in credit decisions.

Finally, throughout 2019 BNP Paribas has boosted training on ESG risk management systems for the financing business lines and control functions (Risk and Compliance). In addition to e-learning modules on sector-specific policies available in eight languages, 12 interactive sessions were held to aid comprehension and the command of existing tools. These sessions incorporated methodology reminders and real- life examples. Training has also been delivered to 657 sales and risk employees (first and second lines of defence) in sessions led or jointly led by the Group CSR function. Since 2012, more than 46,600 employees have taken e-learning modules on the sectoral policies.

Integrating ESG criteria into assets under management

In March 2019, BNP Paribas Asset Management launched its Global Sustainability Strategy , making sustainable development the cornerstone of its strategic and investment decisions. The definition of sustainable investment and its application to management processes is based on four pillars: ESG integration, engagement and dialogue ( stewardship ), exclusion and a long-term vision. BNP Paribas Asset Management s three-year roadmap sets targets for the energy transition, environmental protection, equality and inclusive growth.

In this context, BNP Paribas Asset Management also:

■ announced the introduction of a new, stricter carbon policy, effective from 1 January 2020. This applies to all open funds actively managed by BNP Paribas Asset Management and will become the standard for dedicated mandates. BNP Paribas Asset Management has also committed to aligning its portfolios with the objectives of the Paris Agreement. It has therefore called on the European Union and other developed countries, states and cities to set a long-term target for reducing carbon emissions, with net zero emissions by 2050 at the latest, and by 2070 for emerging markets;

■ published its public policy engagement strategy, which outlines its engagement priorities for advancing sustainable finance;

■ made its flagship range of active funds, BNP Paribas Funds, 100% sustainable. All strategies in this range are now managed according to ESG criteria. The BNP Paribas Funds UCITS had EUR 53.5 billion in assets under management at the end of 2019.

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 22,454 resolutions at 1,758 General Meetings this year. BNP Paribas Asset Management abstained from voting on or voted against around 27.7% of these resolutions. 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 2019, BNP Paribas Asset Management abstained 61 times at 16 General Meetings (compared with 16 abstentions in 12 companies in 2018).

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.

BNP Paribas Cardif, the Group s insurance subsidiary, has significantly increased its socially responsible investments:

■ in terms of investment and divestment decisions, ESG criteria were applied to 85% of the EUR 123 billion of assets under management in the general fund at the end of December 2019, compared with 80% at end-2018;

■ worldwide, the SRI approach has grown significantly. At the end of 2019, the Group s Italian subsidiary had a total of EUR 838 million in green and social bonds (+52% in one year) to finance renewable energy, water management and responsible production projects.

Integration of ESG criteria into supply chain management

Within its sphere of operations, the Global Strategic Sourcing (GSS) business applies ESG criteria at several different levels.

First, through the deployment of an ESG risk map within the GSS team in 2019: this identifies purchasing categories that are at high risk for 13 types of ethical issues (corruption, data protection, etc.), environmental issues (pollution, biodiversity, greenhouse gases, etc.) and social issues (human rights, working conditions, discrimination, etc.).

Second, through the ESG supplier assessments carried out during selection: these assessments, which are based on ESG questionnaires (of which Purchases standards account for at least 5% of the score), include confirmation from the supplier that it adheres to the principles of the BNP Paribas Sustainable Sourcing Charter or the local equivalent. In 2019, BNP Paribas signed up nearly 1,200 suppliers to this charter and carried out 2,500 ESG supplier assessments, compared with 2,300 in 2018.