BPCE - 2018 Risk report / Pillar III

CLIMATE RISKS Activities in 2018 and strategic guidelines

Activities in 2018 and strategic guidelines 12.2

Groupe BPCE’s objectivein making CSR a priority in its business lines and decision-makingprocesses (Cooperative& CSR Committee, etc.) is to become a benchmarkfor green growth in the banking industry. To achieve this goal, it can draw on the complementary areas of expertise of its business lines, extensive regional knowledge and a network of stafffully capable of disseminating best practices. Groupe BPCE has confirmed its commitmentto doing an even better job of incorporatingclimate change issues into its risk management system, with the aim of mitigatingor adapting to climate change, by draftingtransparentsector policiesand includingESG (environmental, social, governance) criteria. Accordingly: the Group made this one of the ambitions of the “financing a ● responsible economy” project in the 2018-2020 strategic plan entitled “Promoting green growth: reducingthe Group’s carbon emissions; - expanding the funding of the energy transition in terms of - outstandings and commitments; increasing responsible deposits and savings; - developing the brokerage of sustainable financing (green or - social); incorporating ESG criteria in credit risk policies and drafting - transparent sector policies on controversialactivities. awareness raising campaigns have been conducted, including the ● preparation and distribution of Regulatory Briefs and featuring of special articles in the regulatoryworkbooksin 2017 and 2018; and more specifically: training, summary reports and presentation of past and future - initiatives; coordinationwithin the DRCCP and with other relevant divisions - of BPCE SA group and other Group entities during Group events on these topics; initiation, organization and coordination of working groups, for - application at the institutions and subsidiaries on a common foundation or standard. The directors of the institutionstook part in plenary sessions held by the federations (FNBP and FNCE), including progress reports on the working groups. Connected tools, such as web apps and sites, including in particular the KiosK (sharepoint between the 3000 employees of the RCCP functions), are used to share information via posts, and a special group was formed on the internal social network (Yammer). Climaterisk and green finance were the subject of: a day-long seminar for the Risk and Compliancefunctionsin 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 presentthe Group’sareas of focus and accomplishmentsin 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-relatedevent) on the banking book. The program also involves experts from Météo France, I4CE and Carbone4in France. It is headed by CICERO,a climate researchcenter 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 includingCSR and climate risk in the Group’s general credit risk policy, Groupe BPCE reiterated its commitmentby incorporatingESG criteria in its sector risk policies.The followingpolicieswere 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 incorporatedCSR criteria. As these criteria are implemented,counterpartieswill 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 announcedand implementedin different sectors: controversial weapons (since March 2009), coal (since October 15, 2015), financing of oil derived from oil sands and exploration/productionof oil in the Arctic (since December 2017), tobaccoindustry financing(since December2017). In Insurance, Natixis Assurances is involved in initiatives supporting the fight against global warming announcedby the French Insurance Federation (the FFA)on December7, 2017. For the purposes of the Non-FinancialReportingDirective, the Group mappedout grossrisks: 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 principlesalready implementedby the Group for consistency purposes, as a number of risks are already monitored.Risks are rated, commitmentsdefined 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 disclosureof results for the Groupmay be consulted in Chapter 2 of the 2018 registration document (“Non-Financial PerformanceReport”) and in the annual managementreports of the institutions.

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Risk Report Pillar III 2018