Integration of Sustainability Risks

(pursuant to regulation (eu) 2019/2088 of the european parliament and of the council of 27 november 2019)

Article 3
Transparency of sustainability risk policies

BCP Group is committed to promoting a culture of environmental, social and financial responsibility, namely in mitigating climate change and social inequalities, along with its strategic goals for digital and technological innovation.

Sustainability and ESG (Environmental, Social and Governance) factors are increasingly relevant for our customers, our business and society. The sustainability of Earth is one of nowadays major challenges, and urgent action is not only necessary but also imperative in mitigating climate change and social inequalities.

The European and international commitments, particularly the Paris Agreement and the 2030 United Nations Agenda on Sustainable Development, demand transitioning to a sustainable economic development model, in which the involvement and alignment of the financial sector are decisive. This transition is also promoted by the European Commission Action Plan on Sustainable Finance, which defines the European strategy for the financial sector.

We believe that, to transition to a more sustainable world, we – citizens, corporations and institutions – are responsible in promoting behavior changes, individual and collective, in order to implement economic and social development models that instigate prosperity, job creation, people valuing and respect for the biodiversity.

We aim to have a leading and active role in the necessary changes, and in this context we compromise to integrate the ESG factors in our operations, products and services, as well as in our suppliers' value chain, positively influencing the organization value in the long run, contributing to people's and communities' wellbeing and to the preservation of natural resources and the environment.

BCP Group defined the following sustainability related policies and principles:

• Sustainability Policy;
• Environmental Policy;
• Anticorruption and Antibribery Policy;
• Social Impact Policy;
• Human Rights Policy;
• Diversity and Equal Opportunity Policy;
• Tax Policy;
• Sustainability Guidelines for Suppliers;
• Principles of responsible financing: excluded and conditioned projects.

Article 4
Transparency of adverse sustainability impacts at entity level

BCP Group monitors ang guides its action on the legal and regulatory initiatives related to climate change as a systemic risk for the financial sector, namely:

• The Paris Agreement;
• The 2030 United Nations Agenda on Sustainable Development;
• The UN Global Compact Principles;
• The UN Principles for Responsible Banking;
• The Task Force on Climate Related Disclosures, supported by the Financial Stability Board;
• The Portuguese Government Commitment Letter to Sustainable Finance.

BCP Group is watchful of the changes in prudential and supervision areas, monitoring the development of technical criteria and norms to be widely adopted, aiming to avoid dichotomies between companies and disruptive effects in financing the economy.

BCP Group identifies the risks related to climate change in order to ensure the continuity of the operation in case of natural disaster which interrupts activity, We look to comprehend our portfolio positioning in order to promote and measure its resilience to transitioning to a low carbon economy. Throughout the years we have been financing ecological and energetically efficient projects, including projects to substitute coal energy production for low emission sources and modern energy infrastructures, reduce pollutants emissions and promote energy efficiency, particularly in intensive energy and high emissions industries and, among others, low emissions mobility.

BCP Group integrates the environmental and social risks in its risk analysis processes, integrating policies, standards and procedures in managing them. The environmental risk analysis is part of our processes of customer assessment, credit granting, project finance and discretionary portfolio management.

We recognize that there are activity sectors and projects which are incompatible with the BCP Group commitment on preserving the environment and biodiversity, promoting a sustainable development and climate change mitigation; therefore we incorporate in our decision processes the sectorial financing and investment principles for those industries which are highly exposed to environmental and reputational risks, and we don't finance activities or projects related to:

• Production or trade of illegal products or activities;
• Coal: mining and energy production;
• Weapons;
• Prostitution, pornography and related activities;
• Unlicensed trade of wildlife or endangered species.

BCP Group is assessed by the most relevant ESG analysts and indexes, including S&P Dow Jones Indices, Vigeo Eiris, FTSE, MSCI, Sustainalytics, CDP – Carbon Disclosure Project, among others.

These sustainability indexes are a relevant tool in assessing and communicating our performance in economic, environmental and social areas, as well as a mean to identify and promote improvement.

• Advisory service and non-recurrent investment advisory service (Millenniumbcp)
• No consideration of adverse impacts of investment decisions on sustainability factors (Interfundos)

Article 5
Transparency of remuneration policies in relation to the integration of sustainability risks

The remuneration policy of BCP and Subsidiaries in Portugal (1) is reviewed annually by the competent bodies and aims to make known to employees and members of the administrative and supervisory bodies, what rules and principles are underlying the management of the applicable remunerations.

In order to this, it integrates a set of good governance rules, which establish dispositions meant to ensure alignment of its leaders and all employees with a sane and prudent management of the organization, that considers the interests of all its stakeholders, without incentivizing risk taking higher than those defined, avoiding to create or contribute to situations of conflict of interests, and through these rules and alignment contribute to the sustainability of the institution.

Among these rules stand out the following:

• The principle that the remuneration policy is meant to promote behavior which ensures value creation in the long run and the sustainability of the results throughout time. In this context, the variable remuneration of both employees and executive management bodies takes into account not only the achievement of the objectives, but also the way they are achieved, thus not promoting commercial practices not aligned with the interests of their Clients. Factors such as customer satisfaction, strict compliance with internal and external regulations are also considered.
• Employees and members of the executive board with control responsibilities are assessed on the level of execution of their control responsibilities, to ensure their independence from the business goals of the Institution, promoting the sustainability of the results.
• The fixed component of the remuneration is the major component of the remuneration general conditions; the variable component is generally more conservative, mitigating its potential to generate risks.
• The employees' remuneration is defined according to job, career and level of accomplishment of the settled goals. The promotion system is based on the individual assessment which includes a behavioural component and a goals' accomplishment component, along with the remuneration position of each employee on the remuneration reference for the job.
• The remuneration policy is therefore structured considering the context and the BCP's results and the Subsidiary, including mainly a fixed remuneration based on the job and responsibility level as well as on the career of the employee, making a relevant part of the total remuneration and, when so defined, a variable remuneration or incentives linked to the accomplishment of pre-settled goals and to a prudent risk management. In exceptional circumstances, the variable remuneration might not be attributed, namely when such attribution limits the BCP's and the Subsidiary capability to reinforce its own funds base; its attribution always considers all types of actual and future risks.
• The variable remuneration to be attributed is subject to limits defined according to its percentage in relation to the fixed remuneration, being composed for employees with Key Functions and members of the Executive Board, by cash and shares of BCP (or other financial instrument defined in the Subsidiary's Remuneration Policy, when applicable), and its payment is deferred for a period of 5 years (3 years in the case of Interfundos). In addition to deferral, the remuneration policy provides for rules for withholding BCP shares or other instruments for a minimum period of one year after their availability.
• These rules aim to promote those incentives for the individual performance of these Employees are aligned with the long-term and sustainability goals of the Bank and the Subsidiary, adapted to its risk profile.
• The remuneration policy also includes rules for reduction and reversion of the variable remuneration, to implement whenever justified by the severity of the situation, or in context of significant decrease in BCP's and the Subsidiary profitability conditions.
• A Sustainability Key Performance Indicator (KPI) was integrated into the Remuneration Policies of Employees and Members of the Executive Board, which determines whether variable remuneration and amount are available in the Remuneration Policies of employees and members of the Executive Committee, which determines whether variable remuneration and the amount there is.
• The BCP’s Chief Risk Officer (Executive Administrator with the Risk portfolio) has also, included in its specific KPIs, one related to "compliance with the plan for the implementation of climate and environmental risk monitoring".

(1) Banco ActivoBank, SA e Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, SA

Article 6
Transparency of the integration of sustainability risks

Portfolio Management and Advisory services provided by Millenniumbcp include in their pre-contractual documentation the description of the following elements:

• the manner in which sustainability risks are integrated in the fund selection and portfolio construction processes; and
• the criteria for exclusion and detailed assessment of products for which sustainability risks may negatively impact their returns.

Interfundos - Sociedade Gestora de Organismos de Investimento Coletivo, S.A. (Interfundos) manages and administers only real estate investment undertakings.

The decision-making process is, in this context, based on the following general principles:

• Proportionality: sustainability risks are, like the other ones, weighted according to the nature, scale and complexity of the activity and the size of the organization; and
• Adaptability: the emerging requirements of consideration of environmental, social and government factors are adapted to real estate investment organizations under management.

Article 8
Transparency of the promotion of environmental or social characteristics
in pre‐contractual disclosures

BCP provides portfolio management services which promote environmental and social characteristics, as described in their pre-contractual disclosures.

V.3 - Information updated as of 09-03-2023

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