2018 REGISTRATION DOCUMENT AND ANNUAL FINANCIAL REPORT

2018 Registration document and annual fi nancial report - BNP PARIBAS560

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

Duty of care and Modern Slavery Act and human traffi cking statement

With a view to limiting the impacts of greenhouse gas emissions and to participate in the energy and ecological transition, the Group has already decided to stop the fi nancing of coal extraction as well as the fi nancing of entities whose main activities are in shale gas and oil and oil sands. In order to promote United Nations health recommendations (in particular through Sustainable Development Goal No. 3), the Group has also announced that it was ending its fi nancing and investment activities for tobacco manufacturers, as well as for producers, wholesalers and traders whose revenues come mainly from tobacco.

The Group has an exclusion list and a monitoring list. These lists are periodically revised to include, in particular, new situations involving serious harm to the environment or human rights. The exclusion list covers companies that the Group does not wish to maintain commercial relations with. Reasons may notably include failures to protect the environment or negative social impacts on communities. At the end of 2018, these lists included 992 legal entities (857 excluded and 135 under monitoring), compared to 338 legal entities at the end of 2017. This increase is related to the implementation as of early 2018 of commitments for tobacco, shale gas and oil and oil sands companies .

Before the enactment of the law on the duty of care, BNP Paribas had already put in place ESG risk management systems for its fi nancing and investment activities. These systems are notably based on:

■ the respect of the Equator Principles for major industrial and infrastructure projects. BNP Paribas has been a signatory to the Equator Principles since 2008: they aim to avoid, reduce, mitigate or offset the negative impacts of large industrial or infrastructure projects on communities, ecosystems or the climate;

■ the integration of ESG criteria into the Know Your Customer process (KYC);

■ the development of fi nancing and investment policies to regulate sectors with high ESG risks. These policies, which are available on the Group s website, are updated according to regulatory changes, their expected changes, and reports from the operational teams of the Group s businesses;

■ a progressive integration of ESG criteria into lending and rating policies;

■ a dedicated tool, CSR screening , for large companies belonging to sectors not covered by sectoral policies. This tool is available in all regions of the Corporate & Institutional Banking division ;

■ the use of management and monitoring tools for these risks.

In 2018, the share of loans to companies subject to an environmental and social management system which is specifi c to the concerned activity was 55.6% compared to 54.9% in 2017 and 28% in 2016, the year of reference for this key performance indicator of Group CSR. This increase is mainly due to a more systematic deployment of CSR screening. In 2018, the Group s CSR teams were asked to give an expert opinion in the assessment of ESG risks for 1,627 complex and/or sensitive transactions related in particular to fi nancing, new accounts, export support, and other matters, compared to 1,251 transactions the previous year.

To ensure that the existing system is adapted to the requirements of the French duty of care law, in 2018, BNP Paribas fi nalised a mapping of the risks to which its clients are exposed that covers all business sectors and all the countries where the clients legal entities are located:

■ F or each business sector , the salient risks related to human rights and fundamental freedoms, personal health and safety and the environment were defi ned according to a methodology for rating the level of sensitivity and occurrence of each risk, that is based on the United Nations Guiding Principles reporting framework. The level of risk inherent in each business sector was then determined based on the presence of salient risks;

■ A level of environmental and social risk was defi ned for each country where the Group operates on the basis of reference sources from recognized international organizations and NGOs, such as the International Labor Organization, the World Bank, the United Nations Environment Programme, Human Rights Watch, Transparency International, and the World Resources Institute;

■ T he risk levels inherent in the sectors and countries where the Group operates were then combined to take into account the clients legal entities with a high level of environmental and social risk.

As a result of this mapping exercise, depending on the level of risk exposure of the Group clients' legal entities, extensive vigilance measures were decided by the business lines and functions concerned and validated by the Group Supervision and Control Committee (GSCC).

OUR COMMITMENT TO CONTINUOUS IMPROVEMENT BNP Paribas vigilance approach is part of a drive for continuous improvement. As such, the Group will complete, where necessary, its identifi cation, control and management tools for identifi ed risks, and will report on them each year in its Registration document.