Sustainability within SpareBank 1 SMN & the Alliance

Norway’s path towards sustainability

2

Wind Power Production

Support: Support scheme for wind

power production

1999 2000

Vote in Favour of Emission

Standards for Gas-Fired Power: to

reduce imports of coal-fired electricity

ENOVA SF:responsible

for implementing

energy efficiency policy and

programmes

2002

Ratification of Kyoto Protocol

Funding for Energy Savings

Measures (150m NOK)

20071998

BEEG: Baltic Energy

Efficiency Group

National Hydrogen

Commission

Klimaløftet: Governmental

campaign for public awareness on climate

change

ENERGIX Programme

2014

KLIMAFORSK: Large scale

programme on Climate

Research

NREAP: National Renewable

Energy Action Plan

Paris Agreement

Rainforest Alliance Award

More new EVs sold than new petroleum-

fueled cars

UN-REDD: UN Collaborative Program on Reducing Emissions

from Deforestation and Forest

Degradation in Developing Countries

High-level panel on sustainable ocean

economy

Norwegian Action Plan

for Biodiversity

Implementation of the 2030 Agenda for Sustainable Development

Norwegian Climate Act NICFI: Norwegian

Government’s International Climate and Forest Initiative

2003 2008

2012 2017 2019

Six Norwegian Banks Commit to UN Principles for

Responsible Banking

We support Norway’s ambitious target to be a leading sustainable society, given our status as a regional savings bank

Sustainability governance within the Alliance

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SpareBank 1 Alliance has signed up for the United Nations

Global Compact

• Ensures all 10 principles of sustainability are integrated in day-to-day operations

• SMN reports annually about corporate social responsibility and sustainability efforts based on the guidelines of the of the Global Reporting Initiative

SpareBank 1 SMN is ‘Eco-lighthouse’ certified in Norway

• This is an initiative where over 5400 Norwegian companies, public institutions and other organizations have become certified and follow certain industry specific rules and principles to reduce their environmental impact.

• The EU recognised Norway’s Eco-lighthouse arrangement in December 2017, meaning it complies with the eco-management and audit scheme (EMAS) in the European Union.

SMN and the other banks in the Alliance, have developed a joint

policy on sustainability for suppliers2

• The joint policy encompasses all four major areas of sustainability, including environmental factors

The SpareBank 1 Alliance’s asset manager and SMN Utvikling are guided by sustainability in their

investments

• The SpareBank 1 Alliance’s asset manager Odin is a signatory of the UN PRI (Principles for responsible investments)

• SpareBank 1 SMN Utvikling invests in projects designed to support a positive development of society. NOK 60m has been invested in infrastructure projects and venture funds.(GRI 203-1) SpareBank 1 SMN

(Trondheim)

The Sparebank 1 Alliance is a member of the Norwegian Green

Building Council

• The Norwegian Green Building Council, a part of the World Green Building Council, was established in 2010 to drive sustainability in the Norwegian built environment, primarily through the introduction of environmental rating tools

2 https://www.sparebank1.no/en/smn/about-us/sustainability/environmen-and-procurement.html

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjl8aPP4dTMAhWCJhoKHfaZAMQQjRwIBw&url=http://www.iverde.org/over-iverde/&psig=AFQjCNFFeYqcMQp8Xyb3rfIch3ic948OxQ&ust=1463150262609575





https://www.sparebank1.no/en/smn/about-us/sustainability/environmen-and-procurement.html

At the heart of Central Norway’s community

Source: https://www.sparebank1.no/en/smn/about-us/sustainability.html4

We are the region’s leading financial group and we are present in 42 municipalities. We want to contribute to society’s value creation through responsible banking operations that give confidence to the people

Savings bank• We are a savings bank. This gives us the

opportunity to be in step with people’s lives and to give back to the local community: every year we share a portion of our profits with the local community

Donations• We have defined donations as a strategic

priority area and we return some of the profits to the society since 1840. Through the distribution of social profits, We support volunteerism, young talents, sports, theater

Strong retail focus• We develop sustainable banking products with

the main purpose of ensuring good banking and focusing on developing customers advisers especially in the retail area

Supporting local business and SMEs• We have a responsibility to create growth and

development in Central Norway and to support local businesses and small, medium and micro-enterprises in the region

Environment and procurement • We work continuously to reduce our

consumption of energy, paper and resource demanding travel. Our procurement policy requires all purchase contracts to include documentation of CSR

Ethics and Diversity • We operate following our strict ethical

guidelines in terms of human rights, respect of the environment and anti-corruption. We strive for diversity with regard to ethnicity, religion, sexuality, gender and age

Sustainability is one of five strategic priorities in the group’s new strategy

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Lead the development of Norway’s savings banks

Increasedigitalisationand use of insight

Integrate sustainability into the business

Exploit the powerin our ownershipmodel

Create one SMN

• Strengthened

customer offering and

distribution

• Simplification and

greater efficiency

•Attractive jobs

•Ensure relevance

•New digital solutions

•New income flows

•Efficiency gains

•Collaboration as a

competitive advantage

•Growth

• Sustainable

development

•Reduce risk

•Realise business

opportunities

•Region’s development

and value creation

•Pride and

commitment

• Strengthened

position

SMN is a signatory of the UN Global Compact and the Principles for Responsible Banking

1 AlignmentWe will align our business strategy to be consistent with and contribute to individuals’ needs and society’s goals, as expressed in the Sustainable Development Goals, the Paris Climate Agreement and relevant national and regional frameworks.

2 Impact and target settingWe will continuously increase our positive impacts while reducing the negative impacts on, and managing the risks to, people and environment resulting from our activities, products and services.

3 Clients and customersWe will work responsibly with our clients and our customers to encourage sustainable practices and enable economic activities the create shared prosperity for current and future generations.

4 StakeholdersWe will proactively and responsibly consult, engage and partner with relevant stakeholders to achieve society’s goals.

5 Governance and cultureWe will implement our commitment to these Principles through effective governance and a culture of responsible banking, demonstrating ambition and accountability by setting public targets relating to our most significant impacts.

6 Transparency and accountabilityWe will periodically review our individual and collective implementation of these Principles and be transparent about and accountable for our positive and negative impacts and our contribution to society’s goals.

6

SMN is clear on roles and responsibilities

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GROUP CEO DESIGNATES EXECUTIVE DIRECTORS/MANAGING DIRECTORS AS

‘AMBASSADORS FOR RESPONSIBLE BANKING’

EXECUTIVE DIRECTORS/MANAGING DIRECTORS APPOINT AN ESG

MANAGER FOR THEIR RESPECTIVE BUSINESS LINES

ESG MANAGERS OF EACH BUINESS LINE CONSTITUE THE GROUP’S ESG

COMMITTEE

THE ESG COMMITTEE DEVELOPS AND COORDINATES THE WORK ON ACHIEVING

AN OVERALL GROUP STANDARD

BUSIINESS REPORTING IS DONE BY THE ACCOUNTING AND FINANCE

DEPARTMENT

SpareBank 1 SMN –Steering committee

for sustainability

Incorporating Climate Risk in our credit process

• For 2020 our main focus will be on climate risk• Our aim is to further develop, intensify and flesh out this work in step with

the increase in knowledge and maturity with regard to this theme in the organisation

• We will utilise a risk analysis recommended by the Task Force on Climate-related Financial Disclosures (TCFD)

• Credit policy and guidelines will be further developed in the shape of concrete requirements which will in part be industry-specific

• We aim to conduct a sustainability classification of our own loan portfolio in the course of 2020

➢ Through the integration of climate risk assessments into loan approvals, customer follow-up and pricing, the bank will ensure good monitoring and management of the climate risk to which the bank is exposed

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SMN is a partner & contributor of Cicero’s ‘Sustainable Edge’ climate risk project • Sustainable Edge will aid SMN’s climate risk transition via:

1. Assessing how clients change their incomes, investments and research and development activities over time towards a green transition, thus providing an opportunity to monitor the proportion of green investments and incomes over time

2. Provide an assessment of risk management in respect of physical climate risk and transition risk

3. Provide an assessment of the company’s use of climate scenarios and of the extent to which they comply with the guidelines on how companies should report climate risk from the TCFD

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Sustainability credentials/ratings

• MSCI – A (2019)

• Sustainalytics – Low Risk 20.0 (2020); 80/100 (2019)

• Sustainable Brand Index – 2019 & 2020 industry winner in Norway

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Green Bond Framework

SMN 2020 Green Bond Framework Highlights

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• Green Bonds contribute to global and national environmental objectives

• Close alignment with sustainability ambitions of SMN’s corporate clients in Central Norway

• Contribution and alignment with the UN Sustainable Development Goals (SDG’s)

• Highlighting SpareBank 1 SMN’s sustainability strategy to capital market participants

• Green bonds will help to diversify SMN’s investor base and to broaden dialogue to existing investors

Rationale for structuring a Green Bond Framework

• Addressing increasing demand for more sustainable assets by responsible investors

• Supporting customers’ environmental values

Addressing the call for more sustainable assets

SMN Green Bond Framework Highlights

• Use of Proceeds:

– Energy efficient residential and commercial buildings (methodology from Norwegian building expert: Multiconsult)

– Eco efficient and circular economy adapted products, production technologies and processes

– Clean Transportation

– Environmentally Sustainable Management of Living Natural Resources and Land Use

– Renewable Energy

• The Green Bond Framework adheres to the latest edition of the Green Bond Principles (June, 2018)1

• Sustainalytics has given a positive opinion on the updated Green Bond Framework

SMN updated its Green Bond Framework to accelerate the environmental transformation, adding new UoP

categories

1 Published by the International Capital Markets Association

The four pillars of the Green Bond Framework

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Use of ProceedsProcess for Project

Evaluation and SelectionManagement of Proceeds

Reporting / External Review

1 2 3 4

The net proceeds of the Green Bonds will be allocated to a Green Loan Portfolio consisting of:

• Green buildings

• Eco efficient and circular economy adapted products, production technologies and processes

• Clean Transportation

• Environmentally Sustainable Management of Living Natural Resources and Land Use

• Renewable Energy

• The Green Bond Committee will oversee the entire Green bond process, including the evaluation and selection of Eligible Green Loans originated across relevant business lines

• SpareBank 1 SMN will in this way work on gradually expanding the Eligible Green Loan portfolio

• The proceeds of the Green Bond will be managed in a portfolio approach

• SMN will ensure that, at all times, the balance of Eligible Green Loans matches or exceeds the total balance of its outstanding Green Bonds

• SMN will remove from the Eligible Green Loan Portfolio the loans that cease to be eligible and replace them when necessary for the balance, as soon as reasonably practicable

• Reporting will be based on the Eligible Green Loan Portfolio, which will be aggregated for all outstanding Green Bonds

• Post issuance disclosures will cover both allocation and impact reporting

• Impact reporting available at issuance

Use of Proceeds: Eligible Assets (1/2)

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1 2 3 4

• Residential Green Buildings:

– New residential buildings in Norway (built after 2009) – Norwegian building codes

– Residential buildings in Norway (built before 2009) – EPC labels

– Refurbished Residential buildings in Norway with an improved energy efficiency of 30% – 2 step improvement in EPC, minimum ‘D’

• Commercial Green Buildings:

– New or existing commercial buildings belonging to top 15% low carbon buildings in Norway – Norwegian building codes

– Certifications – LEED Gold, BREEAM/BREEAM NOR Excellent, Nordic Swan or equiv.

– Refurbished Commercial buildings in Norway with an improved energy efficiency of 30% – 2 step improvement in EPC, minimum ‘D’

Green Buildings

• Companies must benefit from selected sustainability certifications on products, services or processes:

• Pure play loans only for SME’s & Larger Corporates (>90% threshold)

Eco-efficient and Circular Economy adapted Products, Production Technologies and Processes

• Loans to finance or refinance production, establishment, acquisition, expansion, upgrades, maintenance and operation of low carbon vehicles and related infrastructures:

– Low carbon vehicles: o Fully electrified passenger vehicles

such as cars o Fully electrified freight vehicles such

as ferries, vessels, lorrys and trucks– Low carbon transportation infrastructure:

infrastructure to support zero emissions passenger vehicles and public transportation such as charging stations for electric vehicles, urban and intercity transit infrastructure

Clean Transportation

New UoP Category

New UoP Category

Use of Proceeds: Eligible Assets (2/2)

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1 2 3 4

• Agriculture:

– Loans to finance/refinance agricultural activities thato Apply robust and appropriate management

practices and/or environmental standards that avoid or reduce GHG emissions

o Are organic e.g. DEBIO certification or equivalent

• Forestry:

– Loans to finance or refinance environmentally responsible forest management

o Forest land certified in accordance with the Forest Stewardship Council (FSC) standards and/or the Programme for the Endorsement of Forest Certified (PEFC)

Environmentally Sustainable Management of Living Natural Resources and Land Use

• Loans to finance or refinance equipment, development, manufacturing, construction, operation, distribution and maintenance of renewable energy generation sources from:

– Solar energy: Photovoltaics (PV), concentrated solar power (CSP) and solar thermal facilities

– Wind energy: Onshore and offshore wind energy generation facilities and other emerging technologies, such as wind tunnels and cubes

– Hydropower in Norway: Hydropower in Norway (boreal regions), lifecycle emissions of less than 100g CO2e / KWh

Renewable Energy

New UoP Category New UoP Category

Process for Project Evaluation and Selection

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1 2 3 4

Potential Green Loan

Eligible Green Portfolio of ‘certified’ Assets

Loan #3

Loan #1

Loan #2

Green Loan Portfolio

Eligible Green Loans

Ineligible loan

Ineligible loan

Eligible loan

Eligible loan

The Green Bond Committee will oversee the entire Green bond process, including the evaluation and selection of Eligible Green Loans originated across relevant business lines.

Compliance with the Green Bond Eligibility Criteria

Alignment with SMN’s sustainability strategy

Alignment with SMN’s environmental and social policies & minimum

Norwegian/international standards

Mitigation of ‘DNSH’ concerns

Management of Proceeds

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1 2 3 4

Eligible Green Loan portfolio

Outstanding Green Bonds

Green Loans Buffer

• The proceeds of the Green Bond will be managed in a portfolio approach

• SMN flags green loans through an internal monitoring system

• Eligible Green Loans are already on SMN’s balance sheet at issuance

• SMN will ensure that, at all times, the balance of Eligible Green Loans

matches or exceeds the total balance of its outstanding Green Bonds

• SMN will remove from the Eligible Green Loan Portfolio the loans that

cease to be eligible and replace them when necessary for the balance, as

soon as reasonably practicable

Reporting - Overview

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1 2 3 4

• The allocation report will provide, on a portfolio basis

– The total amount of investments and expenditures in the Eligible Green Loan Portfolio

– The total amount of green funding outstanding

– The proportion of new and existing loans (financing and refinancing)

– The balance of unallocated proceeds

• SMN also intends to report on the proportion of the SMEs’ revenue from certified products, services and processes which will be used to match the respective proportions for inclusion in the Eligible Green Loan Portfolio.

Allocation Reporting Impact Reporting

• Reporting will be based on the Eligible Green Loan Portfolio, which will be aggregated for all green bonds outstanding

• SMN engaged with Multiconsult to prepare an impact report for the following UoP categories:

– Green Buildings– Clean Transportation– Renewable Energy

• In addition, SMN prepared an integrated impact report providing quantitative as well as qualitive impact per UoP category

Reporting will be based on the Eligible Green Loan Portfolio, which will be aggregated for all green bonds outstandingWe have recently published our first Allocation & Impact Reports

Reporting – Allocation (FY19)

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1 2 3 4

Eligible Green Loan Portfolio Green Funding

Amount (NOK m) Instrument (ISIN) Issuance Date Due Date Amount (NOK m)

Green Residential Buildings 15,569 XS2051032444 Sep-19 Sep-26 4,931

Green Commercial Buildings 2,700

Clean Transportation 683

Renewable Energy 140

Eco-efficient and/or circular economy adapted products,

production technologies and processes5,133

Fisheries (MSC Certification) 3,600

Aquaculture (ASC Certification) and GlobalG.A.P. 1,000

Eco-Lighthouse Certification 533

Total 24,225 Total 4,931

Reporting – Impact (FY19) (1/5)

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1 2 3 4

Residential Buildings Commercial Buildings

24%

76%

Green Residential Buildings Portfolio [sq.m]

Apartments Small residential buildings

Category Area total [m²] Reduced energyReduced CO2

emissions

Eligible portfolio of

buildings731,981 96 GWh / year

11,794 tons /

year

32%

34%

5%

29%

Green Commercial Buildings portfolio [sq.m]

Office buildings Commercial buildings Hotel buildings Small industry and warehouses

Category Area total [m²] Reduced energyReduced CO2

emissions

Eligible portfolio of

buildings618,042 69 GWh / year

8,441 tons /

year

20,235 tons CO2 / year saved

(vs. Norwegian average)

Source: Multiconsult


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1 2 3 4

Clean Transportation

CategoryNumber of

vehiclesSum km / year

Sum person km

/ year

Passenger vehicles 3,173 36.66 mill. 62.33 mill.

Total emissions avoided

(vs. average vehicle with tailpipe emissions)

Scope 1Direct emissions

(tailpipe)

Scope 2Indirect emissions

(power consumption only)

SMN portfolio of EV vehicles

Category Sum person km / year

Total Direct emissions only (Scope 1) 3,518 tons CO2/year

Total Indirect emissions EV’s only (Scope 2) -2,259 tons CO2/year

Total Avoided emissions 1,259 tons CO2/year

Impact assessment: Avoided emissions – Electric vehicles



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1 2 3 4

Renewable Energy

Total emissions avoided

(vs. baseline)

Positive impact of hydropower assets

is 6 gCO2/kWh

CategoryCapacity

[MW]

Total

capacity

[MW]

Estimated

production

[GWh /

year]

Expected

production

[GWh /

year]

Run-of-river

hydropower

plants

0.1 – 3 16.1 56.4 45.1

SMN portfolio of run-of-river hydropower plants

Impact assessment

Category

Produced power

compared to baseline

(GWh / year)

Reduced CO2-

emissions compared

to baseline (tons CO2

/ year)

Eligible plants in portfolio 45.1 5,866


71%

29%

MSC eligible fisheries in SMN portfolio

Trawl / Whitefish Purse seine / Pelagic


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1 2 3 4

Eco-efficient and/or circular economy adapted products, production technologies and processes

Fisheries

IndicatorBenefit MSC

vs. Norway

Benefit MSC

vs. World

% of fishery stocks with biomass

at or above sustainable levels

+23.4% vs.

Norway

+27.5% vs.

World

5,60%

29,00% 33,10%

94,40%

71,00% 66,90%

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

Norway MSC Norwary Total Global

% of Stocks at or above Maximum Sustainable Yield (MSY)

MSY or Higher

<MSY

Source: Courtesy of MSC


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1 2 3 4

Eco-efficient and/or circular economy adapted products, production technologies and processes

Aquaculture (see qualitative analysis Impact Report) Eco-Lighthouse (see qualitative analysis Impact Report)

Source: Courtesy of ASC, GlobalG.A.P and Eco-Lighthouse

Farming of salmon is significantly lower in carbon impact compared to other on-land livestock.

26 %

23 %

20 %

6 %

5 %

4 %

4 %

4 %4 %

3 % 1 %

SMN Eco-Lighthouse Portfolio - by Industry

Construction

Public sector

Retail sales

Other bus.services

Public and social services

Transportation & storage

Property rental

Manufacturing

Hotels, restaurants etc

Information & Communication

Agriculture

Others

Other property

Indicator

CO2 intensity

avoided vs.

chicken

CO2 intensity

avoided vs.

pork

CO2 intensity

avoided vs.

beef

CO2 intensity of protein

avoided (g CO2eq per typical

serving (40g))

0.28 0.7 5.32

External Review

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1 2 3 4

• Sustainalytics considers that the eligible categories will lead to positive environmental impacts and advance the UN Sustainable Development Goals, specifically SDG 7, 8, 9, 11, 12 and 14.

• Sustainalytics is of the opinion that SMN has adequate measures to identify, manage and mitigate environmental and social risks commonly associated with the eligible projects funded by the use of proceeds.

• Sustainalytics considers the management of proceeds to be in line with market practice.

• Sustainalytics views SMN’s allocation and impact reporting as aligned with market practice.

Sustainalytics is of the opinion that SpareBank 1 SMN’s Green Bond Framework aligns with the four core components of the ICMA Green Bond Principles 2018

Project Evaluation & Selection

Reporting

Management of Proceeds

Use of Proceeds

Sustainability within SpareBank 1 SMN & the Alliance · • Sustainable Brand Index –2019 & 2020...

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