BPCE - 2018 Registration document

2 NON-FINANCIAL PERFORMANCE REPORT

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The major CSR impacts of each ESG component (environment, social and governance) were identified and measured for each sector, with three risk levels – low/medium/high – and recommendations and focal points were established. For the environment pillar, climate risk is systematically measured from two different perspectives: physical risk: extreme climate events and gradual temperature ● change; transition risk: air, water and land pollution, CO 2 regulations. ● Observance of national or international standards, agreements or quality certification is also presented by sector, to provide the lending functions with best practices for each sector. As of the end of 2018, all the Group’s sector lending policies incorporated CSR criteria. These policies are approved by the Group Risk and Compliance Committee and by the Group Credit and Counterparty Risk Committee, both of which are chaired by the Group Chairman of the Management Board. The incorporation of ESG criteria in these sector policies will gradually allow counterparties’ transition risk to be assessed. The process has common features for all sectors, but performance indicators are specific to each sector. The Group’s sector policies incorporating ESG criteria aim to assess counterparties’ involvement in climate change and to identify criteria for measuring their performance in this area. Retail banking financing solutions requiring approval by the head of the entity Some controversial activities must be approved by the banks’ local directors, namely casinos, professional sports clubs, and discotheques. Measurement and monitoring of E&S risks and management systems by Corporate & Investment Banking (Natixis) The new ESR department at Natixis ensures environment and social (E&S) risks are taken into account in its financing and investment activities. A risk monitoring team has therefore been assigned to track CSR policies in sensitive sectors, determine which business sectors to exclude from such policies, assess the quality of assessment and monitoring of E&S risks in transactions, and analyze the reputational risk incurred by the parties involved. Implementation of CSR policies in sensitive sectors CSR policies have been drawn up and included in the risk policies applied by the business lines working with the most sensitive sectors. These policies cover the following sectors: Coal On October 15, 2015, Natixis undertook to stop financing coal-fired power plants and thermal coal mining around the world. Natixis will also no longer provide general-purpose corporate financing to companies for which coal-fired power plants or thermal coal mines account for over 50% of their activity.

Naxicap Partners’ formalized ESG policy details the steps that must be followed in the investment process. These steps are strictly monitored by the Middle Office, including: the obligation to conduct a pre-investment ESG and climate analysis, the performance of an ESG audit by external specialists, the inclusion of an ESG clause in the shareholders’ agreement, the preparation of an action plan discussed by the Supervisory Boards of companies in the portfolio, and an ESG vendor audit when the investment is sold. Each company’s ESG performance is monitored, based in particular on annual data collection on specific indicators in a specially-designed application. An ESG report published once a year, available online, summarizes and analyses the data, while highlighting interesting initiatives and areas for improvement. INCORPORATING ENVIRONMENTAL AND SOCIAL (E&S) CRITERIA IN FINANCING AND INVESTMENT ACTIVITIES Integration of climate risk in the Group’s credit risk policy and enhancement of CSR principles A counterparty’s climate risk will be taken into account in the loan approval analysis, based on the Group’s recommendations in each sector: direct physical risks, the consequences of storms, drought, fire, ● rising sea levels, etc.: agriculture, agri-food, construction, transport, hotels and - catering, forestry, real estate (including individual customers), energy and wholesale trade; transition risks arising from regulatory reform or technological ● progress accompanying the transition to a low carbon economy: energy generation and transformation sectors, - sectors with high greenhouse gas emissions whose activity could - be restricted by stricter regulations (construction, manufacturing sector). At Group level, the inclusion of CSR clauses in credit risk policies is considered at each annual review (see below). These efforts expand on the risk analysis centered around the corporate duty of due diligence, the Sapin 2 Act and the non-financial performance report. The non-financial performance report was prepared with several departments from the Risk, Compliance and Permanent Control division. Climate risk is identified in “Exposure to the physical risks of climate change”, “Financing for the energy transition, green and blue growth” and in “Integration of ESG criteria in lending/investment decisions” (see Chapter 2.2.1). Integration of ESG criteria in retail banking sector lending policies After including CSR and climate risk in the Group’s general credit policy, Groupe BPCE reiterated its commitment by incorporating ESG aspects in its sector risk policies with specific ESG criteria for each sector.

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Registration document 2018