BPCE - 2018 Registration document

RISK REPORT Climate risks

a day-long seminar for the risk and compliance functions in 2017, ● attended by renowned experts in the field, including the ACPR, Banque de France, and members of the European Commission’s High Level Expert Group on Sustainable Finance and Finance for Tomorrow (Paris Europlace); a conference for the risk, compliance and finance functions in ● 2018, to present the Group’s areas of focus and accomplishments in recent months. The Group took part, alongside other French banks, in the ClimINvest research program on the analysis of physical climate risk (i.e. an extr eme or continuous climate-related event) on the banking book. The program also involves experts from Météo France, I4CE and Carbone4 in France. It is headed by CICERO, a climate research center based in Oslo, in collaboration with Alterra and Wageningen UR. Furthermore, the Group is still contributing to financial center initiatives on Provision V of Article 173 of the French Energy Transition for Green Growth Act; it is furthering the analysis of its exposure to physical and transition risk at the local level, in order to better adapt its risk policy. After including CSR and climate risk in the Group’s general credit risk policy, Groupe BPCE reiterated its commitment by incorporating ESG criteria in its sector risk policies. The following policies were amended and validated by the Risk Management Committee in 2018: transportation, food & beverage/agriculture, communication & media, automotive, construction and the tourism, hotels and catering sectors. At the end of 2018, all the Group’s sector lending policies incorporated CSR criteria. As these criteria are implemented, counterparties will be analyzed in terms of their involvement in climate change, whether such involvement represents a risk or an opportunity. The process has common features for all sectors, but performance indicators are specific to each sector. From a financing standpoint, Natixis will be incorporating climate issues in a dedicated analysis tool, aimed at assessing the most prevalent non-financial risks associated with customers and their financing projects. In 2018, Natixis was named “Most Innovative Investment Bank for Climate & Sustainability” by The Banker. Moreover, its expertise was acknowledged in Euromoney’s annual survey on Fixed Income, where it took first place in the “Green bonds/ESG” category.

Exclusion policies have been publicly announced and implemented in different sectors: controversial weapons (since March 2009), coal (since October 15, 2015), financing of oil derived from oil sands and exploration/production of oil in the Arctic (since December 2017), tobacco industry financing (since December 2017). In Insurance, Natixis Assurances is involved in initiatives supporting the fight against global warming announced by the French Insurance Federation (the FFA) on December 7, 2017. For the purposes of the Non-Financial Reporting Directive, the Group mapped out gross risks: in terms of governance, products & services, internal operations; ● by defining its main impact (financial, operational, legal, ● reputational and HR); by setting a trend for the future (higher severity, higher occurrence, ● or combination of both). The methodology employed was developed by the CSR division and the DRCCP, using the mapping principles already implemented by the Group for consistency purposes, as a number of risks are already monitored. Risks are rated, commitments defined and KPIs monitored for each Group entity: the Banque Populaire and Caisse d’Epargne networks and the subsidiaries, and for the Group as a whole. This work is audited by an independent third party appointed by each Group entity. The disclosure of results for the Group may be consulted in Chapter 2 of the 2018 registration document (“Non-Financial Performance Report”) and in the annual management reports of the institutions. Through its macro-level risk mapping, one of the institutions reported climate risk as a priority, subsequent to an extreme climate event in a specific geographic area. Consequently, risk management systems will be established or improved, ensuring that they incorporate demonstrated risks. Similarly, in its forward-looking risk analysis, the Group has clearly identified climate risk in conjunction with reputational risk, and as a risk in its own right.

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Registration document 2018