Sustainability at Eurobank

The most common definition for sustainability has been given by the UN Brundtland Commission – which defines it as “the development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs” – but does not often meet the need to express the business case of sustainability. For several decades, sustainability has had a large impact on driving global decisions at a political and business level, but at the same time it is often regarded as a corporate trend that is not directly connected to business.

It is, therefore, important for businesses to understand sustainability within the context of their business and make the appropriate connection with the very same elements that define the values and operational substance of each company. It is only then, when sustainability is embedded as a core structural element of a company, that it makes business sense.

Eurobank, has expressed its corporate Purpose as “Prosperity needs Pioneers”. Through this purpose, it aspires to create a future that embraces growth and prosperity for all. Prosperity has been chosen as a powerful term that encapsulates economic wellbeing and social growth in the present and in the future. Pioneers have been chosen as the Bank regards its clients as the Pioneers who enable prosperity in the countries where it operates. It believes that its purpose for supporting its pioneering clients in enabling prosperity for the long-term common good is inextricably linked to the very foundation of sustainability as a concept for thriving societies within a protected natural environment.

Eurobank has expressed the Environmental, Social, Governance (ESG) aspect of its business through the lens of Impact generation. The ESG Strategy has been defined in a holistic approach, as two pillars of impact generation: the operational impact arising from its activities and the financed impact resulting from the Bank’s lending and investing activities to specific sectors and clients. These two pillars of impact aim to capture the essence of the Bank’s business effect on the climate, the protection of the natural environment, its contribution to addressing societal challenges at large, the prosperity of its own people, its contribution to raising business capacity in the markets where the Bank operates, and the internal processes that build and secure the confidence of its stakeholders. The timing of this impact is of critical significance, as Europe is rapidly recovering from the economic and social consequences of the successive health, financial, energy and geostrategic crises of the past decade, in a continuous effort to make economies and societies more sustainable, inclusive, resilient and better prepared for the challenges and opportunities of the green and digital transitions.

Eurobank places more importance on sustainability than ever before. The Bank’s approach to sustainability is attached to its ambitious vision to reimagine its business and its operations in a transformative journey to the next decade towards a lower carbon future, an innovative digital environment that enhances the potential of its clients, a diverse, inclusive and equitable society, and a governance environment that builds trust in the market. The Bank’s ambition for sustainability is expressed through quantified objectives, such as its detailed action plan to align its operations, portfolio and investments to become net zero by 2050.

The Bank’s operational impact strategy is based on three pillars, each of which is supported by a specific objective, commitments and targets.

The Bank understands that sustainable development is key to prosperity. To this end, its commitment to support the transition to a greener economy by offering financing solutions that foster growth and sustainable development is at the core of its financed impact strategy.

As a signatory of the Principles for Responsible Banking (PRB), the Bank has been working on developing targets that will enable it to mitigate the negative and amplify the positive impacts arising from its financing activities.

Leveraging on tools, and enablers, such as the climate risk assessment exercises and the Sustainable Finance Framework, the Bank’s strategic approach is to support the achievement of the climate and environmental objectives, through financing, advisory and capital raising solutions to current and potential clientele.

The Bank sets and refines its targets, and is in the process of establishing comprehensive management mechanisms, KPIs and milestones to better implement and monitor these. Aligning the Bank’s activities with the Paris Agreement on climate change, the EU Sustainable Finance Action Plan and the UN SDGs is a key aspect of setting such targets.

The Bank’s Financed Impact Strategy will evolve based on the following pillars:

1. Sustainable Financing
   Portfolio and sectoral targets with regard to financing the green transition of the Bank’s clients.
2. Portfolio alignment
   Transition pathways for corporate clients to achieve specific targets in line with climate transition pathways (1.5^oC / 2^oC).
3. Net zero strategy
   Sectoral decarbonisation targets covering the Bank’s lending portfolios with phased target-setting up to 2050.

Specifically for the “Sustainable Financing” pillar, the Bank had set the following targets in 2022:

1. Operationalise its Sustainable Finance Framework (SFF) in terms of policies, procedures, and processes.
2. Expand data collection capabilities for climate risk related data.
3. Increase penetration of ESG products.
4. Assure at least 20% of the annual gross new corporate disbursements are green / environmentally sustainable.

The Bank has set the following targets for sustainable finance disbursements in the following years:

The Bank plans to revisit and update its Financed Impact Strategy on an annual basis, in line with best market practices, aiming to develop a specific approach towards the “Portfolio alignment” and “Net zero” strategic pillars. To this end, the Bank intends to take the following actions:

Sustainability at Eurobank is deployed across an ESG governance structure that addresses both regulatory requirements and voluntary commitments. BoD oversight with respect to ESG Strategy is addressed through the inclusion of ESG items in the Board Meetings agenda, as per international best practice.

The Group has updated its governance structure by introducing and defining the roles and responsibilities in relation to ESG and climate related and environmental risks, embedding regulatory guidelines and market practices.

The Group applies the elements of the three lines of defence (3LoD) model for the management of operational risk overall. The three lines of defence model enhances risk management and control by clarifying roles and responsibilities within the organisation.

Eurobank’s ESG governance model also ensures that the management of relevant climate-related and environmental risks is integrated in the Bank’s three lines of defence.

The updated governance structure aims to further enhance the effective oversight of ESG matters at Management / BoD level.

Over the past year, the Bank has taken significant steps to enhance its ESG governance model, and support the roll out of its ESG strategy and the integration of ESG and C&E risks.

Enhanced Governance Structure and Committees

• Oversight of climate risks at management body level through allocation of responsibilities to BoD and management committees.
• A BoD Member is responsible for climate-related and environmental risks.
• Establishment of two Committees that supplement the governance arrangements in the area of ESG / climate risk i.e. Environmental, Social & Governance Management Committee and Climate Risk Stress Test Committee.

Integration of CR&E Risk Management across the three lines of defence

• Dedicated teams within CIB and Retail Divisions, for overseeing ESG and sustainable financing activities.
• Automated process established to assess and classify sustainable opportunities.
• ESG Division responsible for the design and monitoring of the Operational Impact Strategy and oversight of the Bank’s overall ESG performance.
• Group Climate Risk Division responsible for managing and monitoring CR&E risks, PMO office for the implementation of the Climate Related and Environmental risks roadmap, preparation and submission for approval of the Financed Impact Strategy, along with Business and Risk Units.
• Intensive training on sustainable finance and climate risk to Bank personnel.

The roles and responsibilities of the key governance bodies / committees / divisions are as follows:

Board of Directors (BoD / Board)

Operates guided by Group’s vision, values and standards; sets the strategic aims of the Group, assesses the potential risks and manages them sensibly and efficiently; ensures that robust processes are in place to monitor organisational compliance with the agreed strategy and risk appetite and with all applicable laws and regulations. The Eurobank Holdings / Eurobank Boards have assigned an executive member as the BoD Member responsible for CR&E risks. As part of his duties the responsible BoD member updates the BoDs of the Eurobank Holdings and of the Bank on climate change and environmental related risks at least on a semi-annual basis.

Board Risk Committee (BRC)

Oversees implementation of and adherence to the Bank’s risk policies, including climate-related and environmental risks, in order to assess their adequacy against the approved risk appetite and strategy; determines the principles which govern climate-related and environmental risk management across the Bank and the Group in terms of identifying, measuring, monitoring, controlling and mitigating risks; approves risk principles, risk policies, procedures and methodologies. Additionally, the Group has established two Committees that supplement the governance arrangements in the area of ESG/Climate risk.

Management Risk Committee (MRC)

Oversees the risk management framework of the Group. As part of its responsibilities, the MRC facilitates reporting to the BRC on the range of risk-related topics under its purview, including CR&E risks. The MRC ensures that material risks are identified and promptly escalated to the BRC and that the necessary policies and procedures are in place to prudently manage risk and to comply with regulatory requirements.

Environmental, Social & Governance Management Committee (ESG ManCo)

Provides strategic direction on ESG initiatives; reviews the ESG Strategy prior to approval; ensures the integration of the elements of the ESG Strategy into the Bank’s business model and operations; regularly measures and analyses the progress of the ESG goals and performance targets; ensures the proper implementation of ESG-related policies and procedures, reviews and approves ESG-related reports and ensures that they are in accordance with related Standards and Guidelines. It is chaired by the BoD Member responsible for climate-related and environmental risks.

Climate Risk Stress Test Committee (CRSTC)

Is responsible for designing and executing the Group’s CRST Programme; coordinates all activities relating to Climate Risk Stress Testing including risk identification, scenario design and stress test execution; reviews and challenges the output at each stage of the process prior to escalating to the Executive Board.

Going forward, the Bank aims to enhance the CR&E risk oversight responsibilities for the management body by introducing climate risk related aspects in the Bank’s fit and proper criteria, considering relevant ECB consultation. Additionally, the Bank plans to provide dedicated training on CR&E risks to the management body members and to further update the Terms of Reference (ToRs) of Board and Management Committees to incorporate and allocate additional responsibilities for the oversight of the CR&E risks.

ESG Division

The ESG Division acts as a custodian of ESG Principles and Culture to enhance the Bank’s Impact, and as a cross functional coordinator to ensure alignment on ESG issues and interdependencies, as well as compliance with relevant existing and upcoming operational impact related regulations. Specifically, the ESG Division is responsible for designing / reviewing the ESG Operational Impact Strategy and monitoring its implementation, with a leading role in selected areas, providing also support to international subsidiaries. Furthermore, the ESG Division coordinates and prepares ESG operational impact-related reports in line with applicable standards/ regulations, in cooperation with involved subject-matter responsible Units, while it is responsible for the UNEP FI PRB implementation. Being responsible for the oversight of the Bank’s overall ESG operational performance, its key roles include the centralised management of ESG Ratings, seeking continuous improvement in related scores. The ESG Division also manages the ISO Management Systems under the related provisions of equivalent policies and the Operational Impact Strategy. The ESG Division collects, calculates and reviews data related to the operational impact, in line with the associated certified management systems, while it also ensures implementation of corresponding initiatives (e.g. operational net zero transition, energy self-production, energy and emissions monitoring, green building certifications, recycling and circular economy management).

Business Units

The Business Units, namely, Corporate and Investment Banking and Retail Banking, are primarily involved in executing all portfolio-related ESG activities, including the implementation of the financed impact strategy. Key responsibilities are classified under three main categories:

1. ESG Strategy
   Executing and monitoring financed and specific operational ESG goals and performance targets.
2. Sustainable Financing/Funding and Investments
   Identifying sustainable financing opportunities and designing relevant solutions and ESG products.
   Performing Sustainable Financing assessment, in line with the Sustainable Finance Framework.
   Implementing and monitoring Sustainable Investment and Green Bond Frameworks.
3. ESG and Climate Risk Management
   Performing the ESG Risk Assessment.
   Identifying and implementing mitigation action plans for ESG and Climate related risks.

To effectively manage ESG and sustainable financing related activities, a dedicated function, the Sustainability Center of Excellence is being initiated in 2023. In the meantime, CIB ESG coordinator is responsible to oversee ESG and sustainable financing activities. Regarding the Retail Banking Division, the Bank has introduced two ESG coordinators, who are responsible for organising and supporting ESG-related activities.

Group Climate Risk Division (GCRD)

The GCRD has the overall responsibility for overseeing, monitoring and managing CR&E risks. Specifically, the GCRD operates as the Project office responsible for the implementation of the climate related and environmental risks roadmap (“Programme Field”), with a coordinating and supervisory role on all related project streams to ensure alignment with the Bank’s business strategy and the regulatory authorities’ expectations. In this context, the GCRD ensures the implementation of corresponding environmental and sustainability initiatives (frameworks, policies, procedures and products) and compliance with relevant existing and upcoming regulations, under an ongoing bank-wide programme, in line with the agreed supervisory roadmap, which is accelerated where possible. The GCRD is also responsible for coordinating with Business and Risk Units, preparing and submitting for approval the Financed Impact Strategy, and monitoring its implementation. Furthermore, the GCRD leads the 2nd line of defence independent sustainable lending re-assessment process. Specifically, in the context of implementing the approved SFF, the Division is responsible for assessing the sustainability features of new loans and products according to the criteria set within the SFF. Going forward, the role of the GCRD will be expanded, covering the management of ESG risks.

Group Compliance General Division

The Group Compliance General Division monitors compliance with ESG/climate-related regulations and standards. Its key roles include:

Regulatory compliance

• Monitors the regulatory environment and emerging trends around sustainable financing, informs the 1st and 2nd lines of defence and may propose required changes/enhancements for the relevant policies and documents regarding sustainable financing offerings.
• Issues a regulatory bulletin which refers to regulatory developments and their impact on the Bank’s operation in terms of ESG risks.
• Complements the risk management framework and monitors the alignment of institutions’ activities with applicable laws, rules, regulations and standards, including ESG regulatory aspects.

Compliance Risk Assessment

• Assesses conduct risk in relation to ESG.
• Performs compliance checks with regard to ESG-related conduct risk.

Policy Updates

• Maintains the Bank’s conduct related policies (e.g. AML and Sanctions, Anti-Bribery and Corruption, etc.), including their ESG elements.

Product offering monitoring

Via its participation in the Products and Services Committee and process, provides advice and checks on Bank’s ESG product offerings, including that promotional statements do not misrepresent products or services to customers.

Group Operational Risk Sector (GORS)

The GORS is responsible for establishing an effective operational risk management framework and for overseeing its implementation across the Group and across all lines of defence, aligned with regulations, standards, good practices, Internal Policies, Internal Governance Control Manual (IGCM) and with Group’s business objectives and values.

In order to further strengthen the existing Operational Risk Framework in alignment with increased regulatory expectations, as defined in relevant EBA Guidelines and BCBS Principles, the BoD has identified that the management of Non-Financial Risks (NFRs) has become increasingly critical for the Group and decided to address them holistically. Non-Financial Risks include operational risks as well as aspects of ESG risks, strategic risk and reputational risk, and are gradually becoming integrated to the Non-Financial Risks Framework.

In this context, Operational risk arising from ESG factors is being managed in accordance with the requirements set out in the Non-Financial Risk Management Policy and other relevant operational risk management policies.

Internal Audit Group (IAG)

In recent years, the IAG has recognised ESG internal controls and the risk management framework as an area of focus, and has taken several initiatives and actions within its strategy. These aim to ensure adequate coverage of the area, in line with the Bank’s strategy as well as industry and regulatory developments.

• Methodology / Infrastructure – The management of ESG risks and the Bank’s initiatives are recognised as a separate auditable area, subject to risk-assessment. Furthermore, climate risk was recently recognised as a separate risk category assessed in all relevant areas of the audit universe, in line with the Bank’s risk taxonomy. This category will be extended to cover the whole spectrum of ESG risks in line with respective developments in the Bank’s risk definitions. The Bank’s climate risk definition currently covers both physical and transition risk drivers of the C&E risk. The IAG is in the process of operationalising the change and reflect it in the IAG’s risk assessment, audit planning and audit reports, with the aim to monitor the IAG’s coverage in terms of timing and findings, assisting in appropriate future planning and monitoring in this area, including more focused monitoring of relevant issues by the Bank’s Board and the AC. Due to timing considerations, the assessment of the C&E risk per AU line will be reflected in the 2023 risk assessment which informs the 2024 AP.

• Resources – The IAG conforms with the standards of the Institute of Internal Auditors (IIA) International Professional Practices Framework (IPPF), ensuring among others the “appropriateness and sufficiency” of IAG Resources. “Appropriateness and sufficiency” of resources engaged in all audit assignments is key for the IAG. Appropriateness refers to the right mix of knowledge, skills, and other competencies, and sufficiency refers to the quantity of resources needed to accomplish the IAG role with due professional care. Traditionally, the majority of IAG staff possess professional qualifications/certifications from internationally recognised professional bodies, such as ICAEW, ACCA, CIA and CISA. The IAG has extended its pool of professional qualifications/certificates to the area of ESG, with one staff member certified in Sustainability and Climate Risk, and with more auditors to commence relevant certifications from 2023 onwards. The IAG intends to experiment with the available industry professional body offers, such as GARP’s Sustainability and Climate Risk (SCR®) Certificate, CFA’s Certificate in ESG Investing, ICAEW Sustainability Certificate, etc. This comes in parallel with other initiatives aimed at upskilling through dedicated training sessions (e.g. Bank internal, Moody’s, webinars), “on-the-job” upskilling (participation and consultation in the Bank’s projects and initiatives around ESG) and increased awareness (e.g. establishment of IAG’s ESG Focus Group, sharing knowledge on ESG practice and regulatory initiatives, targeted presentation to AC members). At this stage, the IAG has opted to embed the right mix of skills and knowledge within its existing organisational structure, given the multifaceted nature of ESG risks, affecting all businesses and operations of the Bank, to a siloed approach, aiming at a holistic consideration of the Bank’s ESG risks. This approach will be revisited in the future.

• ESG / Audit Universe Coverage and Audit Planning – Following the infrastructure steps described above, since 2021 the IAG has carried out several assignments around ESG, in parallel with the monitoring of the Bank’s initiatives in this area. Specifically, the 2021 annual audit plan (AAP) included participation in the Bank’s ESG Programme Field, and a consulting assignment on ESG reporting. The 2022 AAP included a consulting assignment on the Climate Risk Stress Test 2022 and the commencement of audit assurance work around the operationalization of the C&E Risk Management Framework within targeted areas of the Bank (e.g. Transformation Project; Investments). A similar approach has been planned for the 2023 AAP, with a focus on ESG matters in targeted reviews, taking into account the ECB’s 2022 report on “Good practices for C&E risk management” (e.g. Risk Management and Governance), complemented by a consulting assignment around the Pillar 3 ESG Disclosures. Finally, the IAG has considered the supervisory requirements and specifically the ECB’s report on “Good practices for C&E risk management”, to develop its three-year audit plan around ESG risk, which will be completed within the 2023 risk assessment and audit planning exercise, to be approved by the AC by year-end (indicative areas of focus are governance, regulatory compliance, risk management and disclosures). Key areas of focus include risk materiality, governance and strategy, C&E risk management framework, products design and offering, disclosures, etc. These initiatives come in addition to the existing coverage by IA in ESG-related areas, such as consideration of AML-perspectives in loan origination (governance-social financing practices), review of compliance with code of conduct or market practice codes (governance operational and financing practices) and relevant non-recurring and forensic audit work. The outcome of IAG assignments is reflected in the audit reports, which are distributed to Management, the AC and the external auditors. The IAG meets frequently with Senior Management to discuss audit findings and the progress made in resolving them. It also prepares quarterly reports for the Audit Committee.

The IAG is also dedicated to integrating ESG friendly practices into its operations, by increasing staff awareness, taking actions to reduce its environmental footprint and positively impact the environment and contribute to society (e.g. charity work and/or contributions), in parallel with the implementation of good governance and human capital management practices. In summary, the IAG places significant focus to ensure that adequate coverage is provided in the field of ESG risks, as well as that its operations integrate ESG aligned and impact practices. Overall, the IAG is committed towards the mindset shift that ESG requires. It recognises the crucial role of ESG factors in business operations and decision-making, aiming at a proactive and gradual integration of an ESG mindset into audit processes. The aim is to drive positive impact and promote sustainable practices.

Alignment of the Remuneration Policy with the Bank’s environmental and social objectives

The Bank promotes the integration of sustainability factors into its remuneration policies. The Bank’s Remuneration Policy, which applies to all Bank employees and covers their total remuneration, forms an integral part of its corporate governance practice. It promotes sound and effective risk management and is consistent with the objectives of the Bank’s business and risk strategy, corporate culture and values, risk culture, including ESG factors, as well as the long-term interests of the Bank, and should not encourage excessive risk-taking on behalf of the Bank.

The Bank aims to integrate climate and environmental risk aspects into its Remuneration Policy. In particular, within 2023, the Remuneration Policy will be linked to specific climate risk performance indicators/KPIs to monitor progress towards achieving the Bank’s targets in terms of climate risk management, financed and operational impact.

Dedicated group-wide programme to address the requirements of the ESG ecosystem

The Group launched an initiative, namely “Programme Field”, with an aim to develop and implement its sustainability strategy, integrate climate risks, fulfil its UNEP FI PRB signatory commitments and ensure readiness to comply with upcoming sustainability-related regulations (i.e. EU Green Deal, ECB Guide on climate-related and environmental risks, EU Taxonomy Regulation, etc.). Through this initiative, the Group has also identified, assessed and implements climate-related and environmental (CR&E) risk action plans within the three lines of defence.

Integration of ESG Risk Management across the three lines of defence

The ESG Risk Governance involves various key stakeholders (i.e., business functions, Units, and Committees). The Group applies a model of defined roles and responsibilities regarding the management of ESG risks across the 3 lines of defence, considering all relevant guidelines and regulatory requirements:

• 1st line of defence
  The business units (CIB and Retail Banking) are responsible for assessing, managing and monitoring their risk levels in all risk categories, including ESG risks. The CIB ESG coordinator, along with the Retail Banking Division ESG coordinators, are responsible for undertaking all relevant ESG and sustainable finance activities. In addition, the role of the ESG Division in the 1st line of defence has been revisited to include the responsibility for the Operational Impact Strategy as well as Sustainability Reporting, Environmental & Energy Reporting (EMAS Report, Greenhouse Gases Emissions Report per ISO14064) and ESG ratings.
• 2nd line of defence
  The Group Risk Management General Division (GRMGD) is independent from the business units and has full responsibility in setting the risk strategy and risk appetite framework, including ESG risks. Within the GRMGD, the dedicated Group Climate Risk Division has been established, with the overall responsibility for overseeing, monitoring, and managing ESG risks and sustainable financing activities, in cooperation with the other GRMGD sectors/divisions, as well as with Group Compliance General Division.
• 3rd line of defence
  The Internal Audit Group (IAG) independently reviews the adequacy and effectiveness of the internal control framework in place regarding ESG risk management, following a risk-based approach.

Sustainable Finance Framework Assessment Tool

Eurobank has developed a web-based tool automating the process for assessing and reviewing financings against the criteria and alignment levels of the Sustainable Finance Framework (SFF). The tool is currently used for the Corporate Portfolio, and underpins the classification, evaluation and approval of sustainable financing opportunities in a structural, workflow-based, manner. Moreover, the SFF assessment tool guides its users so they may identify financing opportunities and proactively engage with clients on sustainable financing dialogue.

ESG awareness and capacity building

Eurobank is placing great emphasis on building capacity among its employees, so they are able to support its clients on their sustainability journey and their green transition. To this end, in addition to launching ESG initiatives for its clients, Eurobank implements an ESG upskilling plan for its employees. Eurobank’s internal awareness sessions regarding ESG and CR&E matters cover both members of the management body and other stakeholders across the Bank (e.g. business units). Additionally, the Bank has offered training to stakeholders from all three lines of defence (i.e. business units, risk management units, Internal Audit) regarding the SFF, to enhance their understanding. Specifically, the following awareness initiatives took place within 2022:

Employee ESG awareness training modules

Within 2022, the Bank launched “ESG Thinking”, an ESG awareness programme for employees, consisting of the following modules:

• Module 1 – ESG and World
  Fundamentals of ESG, megatrends and related risk and opportunities as well as the importance of ESG within an organisation described through business cases.
• Module 2 – ESG and the Bank
  Key drivers of ESG, its impact on the banking industry and the ESG regulatory landscape. The ways in which the Bank engages with ESG through frameworks, initiatives and products.
• Module 3 – ESG and Me
  Content aiming to cultivate an open and growth mindset when dealing with ESG issues by motivating employees to take personal action through practical steps personally and professionally.

In 2022, 2,543 employees participated in the ESG Thinking programme, totalling 3,132 learning hours.

Dedicated training sessions to Business Units

Apart from the general upskilling programmes, within 2022-2023 the Bank conducted dedicated sessions tailored to the requirements of specific business units and functions, crucial for delivering the Bank’s strategy. These sessions focused on the following topics:

• ESG ecosystem, Sustainable Finance Framework (SFF) and assessment tool:

Introduction to the ESG ecosystem, the role of the financial sector in driving action for sustainable development and the relevant regulatory framework.

Presentation of the approaches and eligible activities of the SFF and its integration into the loan granting process.

Presentation of the workflow and functionalities of the SFF assessment tool along with practical application on case studies.

• Use of sustainability reporting for identifying sustainable financing opportunities:

Introduction to sustainability reporting and major reporting frameworks and standards. Demonstration of the link between the Bank’s SFF and information in sustainability reports. Case studies identifying key sustainability report elements and their link to sustainable financing opportunities

During 2022-2023, there were over 500 employee participations in the dedicated training sessions for the Bank’s business units, totalling over 1,300 hours of training.

In September 2019 Eurobank signed the Principles for Responsible Banking, affirming its commitment to play an active role in implementing the UN Global Sustainable Development Goals (SDGs) and the Paris Agreement on Climate Change. The Principles for Responsible Banking are supported by over 220 banks around the world and were shaped by the global banking industry through the United Nations Environment Programme Finance Initiative (UNEP FI).

All actions towards implementing, and fully embedding the Principles for Responsible Banking by 2024, are of immense importance, as these Principles define the role and responsibilities of the banking sector in shaping a sustainable future, allowing banks to include sustainability in all their activities and identify areas that need improvement.

Transparency and accountability are essential elements, therefore, public reporting of Eurobank’s targets, implementation and progress is an integral step within the context of the Principles.

In full compliance with its obligations relating to implementing the Principles, Eurobank has issued its 3rd PRB Progress Report as part of the Annual Report 2022 Business and Sustainability Report, for the period from March 2022 to March 2023 (Appendix VI).

In its 3rd PRB Progress Report, Eurobank discloses the actions undertaken and the progress made towards implementing the 6 Principles during the last 12 months, laying emphasis on the elements regarding impact analysis, target setting, target implementation and monitoring and governance structure, which were externally assured for the first time ever.

Key highlights on the Bank’s 2022 performance and progress towards implementing the Principles include:

Principle 1: Alignment

The Bank approaches ESG in a holistic manner, in line with the commitments it has undertaken, the regulatory framework requirements and globally acknowledged best practices. It prioritises the management and mitigation of any underlying economic, environmental and social risks arising as an integral part of developing products and services, while complying with the applicable regulatory framework.

Furthermore, the Bank develops and improves mechanisms to identify, measure and communicate impact, across the full spectrum of its activities. It redefines sustainable development actions and goals, taking into consideration the Sustainable Development Goals (SDGs), Principles for Responsible Banking and other international agreements and trends (e.g. UN Global Compact).

Principle 2: Impact and Target Setting

The Bank has defined its strategic commitments and set specific measurable short and long terms targets (described in the ESG Strategy section).

The commitments and targets were developed taking into account, among others, the significant impact areas identified through the impact analysis conducted in the context of implementing the UNEP FI Principles.

Specifically, the targets aim to mitigate negative impacts arising from the Bank’s financing activities to its consumer and business banking clients in the climate and resource efficiency / security areas.

Regarding the Bank’s progress, it has overachieved its 2022 target for at least 20% of the annual gross new corporate disbursements to be classified as green /environmentally sustainable.

As a first step towards its commitment to align its portfolio with climate transition pathways and set net zero targets, the Bank has calculated and disclosed its financed emissions and is planning to set decarbonisation targets covering its portfolio, with the ultimate objective of reaching Net Zero by 2050.

Principle 3: Clients and Customers

The Bank has developed an approach to support its clients’ green transition and encourage sustainable practices, consisting of the following elements:

• Guiding frameworks defining the approach and criteria for classifying its financing and investing activities as sustainable
• Direct financings aiming to finance projects that meet green eligibility criteria, or sustainability linked loans, focusing on leveraging clients’ commitments towards green transition.
• Financing solutions for consumers and small businesses that aim to deliver positive environmental impacts.
• Advice to current and potential clients aiming to support their green transition efforts.
• Incorporation of climate-related and ESG risks in the client financing evaluation process.

Principle 4: Stakeholders

An integral part of the Bank’s approach to sustainability is to foster strong relationships of trust, cooperation and mutual benefit with all stakeholders affected by its activities directly or indirectly. In this context, the Bank promotes 2-way communication and develops an ongoing dialogue with stakeholders, so as to be able to actively meet the expectations, concerns and issues raised by all its stakeholders.

Within its Materiality Analysis process, the Bank also engaged its stakeholders with topics relevant to the Bank’s sustainability activities and responsible financing products, aligned with the Principles for Responsible Banking. In the context of extending its positive impacts, the Bank seeks to participate in companies with strong growth prospects, focusing on extroversion and environmental protection.

Principle 5: Governance and Culture

The Bank has deployed an ESG governance structure that addresses regulatory and voluntary requirements/commitments and is responsible for delivering the ESG strategy.

The ESG governance structure has defined the roles and responsibilities in relation to the delivery of the ESG strategy and climate related and environmental risks.

Over the past year, the Bank has taken significant steps to enhance its ESG governance model, and support the roll out of its ESG strategy and the integration of ΕSG risks which include:

• BoD level responsibilities and oversight of the ESG strategy and climate-related / ESG risks.
• Establishment of Committees dedicated to ESG / climate risks.
• Integration of climate risk management across the three lines of defence.
• Establishment of dedicated teams within the corporate and retail divisions responsible for overseeing and delivering sustainable financings.
• Automated process established to assess and classify sustainable opportunities.
• Intensive training on sustainable finance and climate risk to Bank personnel.

Principle 6: Transparency and Accountability

The Bank promotes transparency on its ESG performance by:

• Participating in reputable ESG rating indices,
• Publicly disclosing progress on PRB commitments that for the first time is being assured by an independent assurer.
• Publicly disclosing information according to standards/ frameworks (e.g. GRI, commitment to TCFD).
• Publishing an ESG newsletter on a quarterly basis.

The Bank’s complete progress report against the 6 Principles for Responsible Banking, through the self-assessment template, is presented in Appendix VII.

Other ESG ratings
ESG Ratings and Indices	FY2021	FY2022*
CDP	D	D
ATHEX ESG INDEX	✓	✓
REFINITIV	69	79 ▲
FTSE4GOOD	✓	✓
ISS ESG	E:2 / S:3	E:2 / S:2 ▲
BLOOMBERG GENDER- EQUALITY INDEX	(GEI 2022) ✓	(GEI 2023) ✓

▲improvement *ESG Ratings scores as recorded by 31.12.2022.

An integral part of Eurobank’s approach to sustainability is to foster strong relationships of trust, cooperation and mutual benefit with all stakeholders affected by its activities, directly or indirectly. In this context, Eurobank promotes two-way communication and develops ongoing dialogue with stakeholders, to be able to actively meet the expectations, concerns and issues raised by all its stakeholders.

Eurobank’s materiality analysis is the key process used to define the Annual Report 2022 – Business & Sustainability contents. Adopting the new GRI Standards (2021) methodology, Eurobank identified, assessed, prioritised and validated the positive and negative impacts that the Bank creates or may create on the environment, people and the economy.

Prioritising the identified impacts contributed to determining the Bank’s sustainable development materiality topics. The methodology was carried out along 4 phases:

Understanding the organisation’s context

Overview of business model: An initial overview was performed of the Bank’s activities and business relationships, and the sustainability context in which these occur, drawing upon key internal documentation and available relevant material to gain an informed understanding of the Bank’s products and services, its portfolio, business relationships, and entities.

Identifying impacts

Overview of stakeholders: A mapping of the Bank’s key stakeholders was performed, through a review of internal documents and available relevant material, to identify the individuals and groups whose interests are affected or could be affected by the Banks’s activities.

Identifying operational and financed impacts: The impacts created from the Bank’s products and services, as well as its supply chain and operations, on the economy, environment and people were identified. To develop the pool of issues / impacts to be assessed and prioritised, the Bank considered cross-sectoral, sectoral and bank-specific issues, as well as the UNE FI Impact Radar and impact analysis tool.

All actual and potential positive and negative impacts that the Bank creates through its corporate, business and consumer banking portfolios were identified and mapped against the impact areas and topics of the UNEP FI Impact Radar¹.

Assessing impacts

e-survey: To prioritise the identified impacts and determine the material topics for strategic and reporting purposes, a dedicated electronic survey (e-survey) was set up, targeted at internal and external stakeholders. This was used to assess both positive and negative impacts (actual and potential).

Assessment criteria: The significance of positive impacts was assessed by stakeholders, who took into consideration their scale and scope, whereas the severity of negative impacts was assessed by considering their scale, scope and irremediable character.

Prioritising and validating impacts

Data analysis: The data collected were analysed and impacts were prioritised by taking into consideration their significance compared to the rest of the impact areas, as well as the Bank’s operational strategy. Impacts were then mapped against material topics based on their content and themes.

Materiality threshold: A materiality threshold was set to determine which topics are material.

Finalising the material topics list: The material topics were presented to and cleared by the ESG ManCo and further elaborated by the Programme Field II.

The above materiality assessment was conducted in accordance with GRI standards. Regarding the ESG Risk Identification and ESG Risk Materiality Assessment please refer to “ESG in Risk Management” section, while extensive analysis for Climate Related & Environmental Risks can be found in the Group’s Climate Risk Report.

¹ The Impact Radar is a compilation of Impact Areas and Topics across the 3 pillars of sustainable development. These are used for the purpose of capturing and managing positive and negative impacts of financial institutions and their clients or investees on people, communities and the environment.

Material topics

As per the final stage of the materiality analysis process, the list of topics below was prioritised as material. These formed the basis for determining the contents of this Report, as well as the disclosures of relevant key performance indicators.

Impact materiality

During the reporting period, Postbank adopted its ESG Strategic Vision, reiterating its ambition to act as a leader in sustainable finance in Bulgaria. It launched a dedicated ESG website, where all information related to the sustainable business activities of the organisation is posted. Postbank successfully completed the 2-year reporting cycle for the Principles of Responsible Banking (PRB), stemming from it being a signatory to the PRB. Continuing the efforts of previous years, and in close communication with the Eurobank Group, it has launched a number of activities directed at further improving its operational ESG impact, and has been targeting its versatile social programme both towards its employees and towards society in the country.

Postbank has set up an organisational structure to address the ESG agenda: Environmental and Sustainability Committee (ESC), consisting of EXCO members and chaired by the COO, thematic working groups under the ESC, and an Environmental and Social Affairs Coordinator. Postbank has developed its local Sustainable Finance Framework as a central document for applying the EU Taxonomy on Sustainable Economic Activities in its lending processes, and has drafted its Climate Risk Roadmap for fulfilling the ECB expectations in this area. The Postbank has adopted a digital process for evaluating and monitoring environmental and social risk in lending, made possible through embedding automated solutions in its core banking system.

Eurobank Cyprus is committed to investing in sustainable development and designing actions to improve its impact on environmental sustainability, social responsibility and corporate governance, in close communication with the Eurobank Group, to ensure alignment with the latest ESG regulatory requirements/guidelines. Its strategic objectives include adapting its business and operation to address climate change challenges, accommodating social needs within its business model, and safeguarding prudent governance, in accordance with supervisory initiatives and following international best practices.

Eurobank Cyprus developed its Governance Project on ESG issues in September 2022, establishing a new ESG Management Committee, chaired by its CEO who is the ESG Project Sponsor. Moreover, its Board of Directors monitors the ESG developments regularly, including its actions to address climate-related and environmental risks. In line with the UN Sustainable Development Goals and the 2030 Agenda, Eurobank Cyprus develops its approach along two distinct levels of impact: financed and operational.

In 2022 it initiated a number of activities for its environmental (operational net zero, paperless banking, circular economy), employer (diversity and inclusion, wellbeing, innovative environment) and social/business impact (socio-economic effect, transparency). It aims is to support its operational impact strategy through a set of actions with measurable targets and KPIs, demonstrating its vision for the coming decade in relation to the environment and its social footprint, while focusing on its people and the ESG impact on the market. Eurobank Cyprus is also in the process of implementing an Environmental Management System (ISO 14001, EMAS) and the execution of the Revised Energy Audits. Lastly, the upgrading of its infrastructure and further digitisation of its services through a large-scale IT project concluded in April 2023, is expected to significantly contribute to minimising its environmental footprint.

Eurobank Cyprus undertook several actions in 2022 in relation to the financed impact, aiming to support customers and society in their transition efforts towards a more ESG-friendly economic environment. A relevant project was launched, focusing on developing its Sustainable Finance Framework and ensuring full compliance with the ECB expectations, as stated in the relevant ECB guide on climate and environmental risks.