NATIXIS - Universal registration document and financial report 2019

NON-FINANCIAL PERFORMANCE REPORT Managing environmental, social and governance risks

Equator Principles As a signatory of the Equator Principles since December 2010, Natixis applies an industry-wide methodology recognized by 101 member banks and financial institutions aimed at evaluating the E&S risks of the projects it finances and assessing the quality of the management systems used by its clients to manage, minimize, and remedy the impacts they cause as best they can. This methodology applies to the financing of investments in new projects or the extension of existing projects. For Natixis it mainly concerns infrastructure, energy (oil, gas), electricity and renewable energy, and the mining and metals sectors around the world. An organizational structure has been set up to involve both the business lines and the ESR Department in assessing and managing transactions. The process includes an assessment of the quality of existing E&S documentation prepared by the client (or client advisory services, if such documentation has not yet been drafted), the measurement and classification of the potential E&S impacts and risks, and, where necessary, the consultation of external specialists. It also provides for the drafting of an action plan for impact mitigation and correction measures, which is included in the financial documentation. Compliance with the action plan is monitored over the life of the financing facility. Natixis’ credit approval process includes a summary of key issues used to assess a project. Details of the analysis and decision-making process, the resources used and full information on transactions audited in this way are available in the annual Equator Principles report (published before July 31 each year and available on the Natixis website (1) ). On November 18, 2019, the banks and other members of the Equator Principles association approved an updated version of the Principles (EP4), which will take effect on July 1, 2020. The new version extends the scope of application of the Principles and strengthens the conditions applied when assessing transactions, in particular in terms of human rights (especially the rights of indigenous communities) and physical and transition risks arising from climate risk. Initiatives have been launched to raise team awareness and organize training.

Assessments performed beyond the scope of the Equator Principles Mindful of the great diversity of client transactions and financing solutions, Natixis ensures the same level of vigilance on the underlying E&S risks of certain types of transactions outside the scope of the Equator Principles. These include acquisition financing transactions not associated with an investment program, financing that is, by nature, for multiple purposes, transactions involving portfolios of assets too large for a dedicated assessment, or certain kinds of assets. In each of these cases, the quality of governance and management of the E&S risks inherent to the industry in question are assessed on the basis of current international best practices and standards, and the services of external consultants are called upon if necessary. Analysis of reputational risk associated with involved parties For all the financing transactions referred to above, and also when deemed necessary for any other transaction, an analysis is performed to determine whether the borrowing company, its operator or main shareholder has a history of poor management of its operations, from an environmental, social or health and safety standpoint. In the interest of establishing lasting relations with its clients, the objective is to raise awareness among the business lines — before a credit decision is made — of all the situations that can give rise to reputational risk, and where necessary to consider appropriate measures. This analysis will be systematically applied when the screening solution described below is rolled out.

A more robust client-assessment system

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To identify, measure and monitor its corporate clients’ environmental, social and governance (ESG) risks, Natixis has built a complementary solution, named ESR Screening.

2019 KEY EVENT A solution to screen corporate clients’ ESG risks The new solution will be gradually rolled out in all regions in 2020. It will include two levels of assessment integrated with existing risk management systems. The first level will rank clients in a risk category based on the context in which they do business, the maturity of V their ESR risk management system, any controversies to which they may be exposed and the type of business relationship they maintain with Natixis. The second level will perform an in-depth analysis of the most material ESG risks. The analysis will focus on V counterparties identified as being the most at risk and will most often involve direct discussions with the client. The system will be integrated with client onboarding and loan approval processes to allow the systematic analysis of ESG risks. It will involve the business lines, Compliance, and the Risk and ESR Departments. A far-reaching training and acculturation program will accompany the system’s launch throughout the year. The assessment process will gradually be applied to the portfolio of existing clients, taking into account the schedule for periodic renewals of financing authorizations.

https://www.natixis.com/natixis/jcms/ala_5415/en/environmental-and-social-risk-management (1)

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019