Banque Internationale à Luxembourg

Corporate Governance of BIL Group

The corporate governance of BIL Group is articulated around the following organs:

A. GENERAL MEETING OF SHAREHOLDERS (GM)

The General Meeting of Shareholders has the widest powers to adopt or ratify any action related to BIL Group. The annual GM receives a management report from the Board on the Bank's activities in the previous financial year and approves the balance sheet and profit and loss account. The annual GM also appoints the Directors and, where necessary, their replacements, while respecting legal provisions regarding the representation of salaried staff and the statutory right for directors to appoint a new director temporarily in case of vacancy.

B. BOARD OF DIRECTORS (THE BOARD)

The Board has overall responsibility for BIL Group and is tasked with defining, monitoring, and ensuring the implementation of robust governance and internal control arrangements for sound and prudent management of the Bank. Among its missions, the Board is responsible for setting and overseeing the overall business and risk strategy, including the Risk Appetite Statement and Framework of BIL Group.

The Board is assisted by four specialised committees:

• Board Audit and Compliance Committee (BACC): Monitors and controls effective implementation and adherence to the Bank's approved charters, policies, accounting standards, and legal and regulatory requirements.
• Board Risk Committee (BRC): Ensures that all material risk matters are addressed and oversees current and anticipated risks within the BIL Group that could jeopardise financial and liquidity capacities.
• Board Remuneration and Nominations Committee (BRNC): Focuses on nomination and remuneration matters, assisting the Board in defining a global Remuneration Charter and advising on the suitability assessment and appointment/dismissal processes for Board and Management Board members.
• Board Strategy Committee (BSC): Assists the Board in setting strategic direction, advising on the Bank's overall strategy and budget, and providing recommendations.

C. MANAGEMENT BOARD (MB) AND EXECUTIVE COMMITTEE (EXCO)

The Board of Directors delegates the daily management of the Bank to the Management Board (MB), which consists of members authorised by the European Central Bank. The MB leads, directs, and manages BIL Group, implementing the strategy and achieving business objectives in line with the risk appetite set by the Board.

The ExCo comprises Authorised Managers and heads of support functions and business lines, chaired by the CEO. The Chief Compliance Officer and Chief Internal Auditor are permanent invitees to the ExCo.

Board Composition

Management body expertise on sustainability matters

The knowledge and experience of climate-related and environmental risk is one of the criteria assessed in the context of the individual and collective suitability assessment exercise, both when on-boarding a new member and on an annual basis. During this exercise, not only is each member asked to self-assess the level of his/her knowledge in this matter but the Bank, through its Board Remuneration and Nomination Committee, and ultimately the Board of Directors, proceeds to its own assessment both at individual and collective level.

In addition to being provided with relevant trainings, the management body receives regular expert updates on how the Bank performs in sustainability-related matters. Having a management body with an appropriate understanding and expertise of sustainability-related matters ensures that this topic is considered when discussing impacts, risks and opportunities.

Information Flow to Administrative, Management and Supervisory Bodies

The administrative, management, and supervisory bodies are regularly informed about sustainability matters through structured reporting mechanisms. Specifically, the ESG Strategic Steering Committee, the Executive Committee and the Board of Directors receive comprehensive updates on a regular basis. ESG matters are also addressed in specific management committees such as the Asset and Liability Management (ALM) Committee or the Credit Committee.

The ESG Strategic Steering Committee

To strengthen ESG governance, the ESG Strategic Steering Committee oversees the ESG Programme implementation, which covers all ESG projects at BIL. The ESG Strategic Steering Committee is composed of seven permanent members, all members of the Executive Committee (including four members of the Authorised Management), and the Group Head of Sustainability.

In 2024, the ESG Strategic Steering Committee convened seven times, with one meeting conducted via circular mail.

The Executive Committee

A regular update of the ESG Strategic Steering Committee is provided to the Executive Committee on a quarterly basis. The ESG Dashboard is presented to the administrative, management and supervisory bodies every six months.

The ESG Dashboard provides a comprehensive overview of BIL's climate change impact, emphasising its operational carbon footprint and financed emissions. It also highlights ESG risks and opportunities associated with the Bank's activities that are most vulnerable to environmental and climate-related challenges, including its real estate portfolio, corporate loan portfolio, banking investment portfolio, and customer investment portfolio.

Board of Directors' involvement in ESG matters

The ESG strategy is fully integrated into the Bank's Energise Create Together 2025 (ECT2025) corporate strategy and is therefore monitored by the Board of Directors. Indeed, the Board of Directors defines and oversees the implementation of the ESG strategy: targets and ambitions, risk appetite and risk approach, evolution of sustainable finance initiatives and the progressive integration of ESG considerations in policies and processes.

• A quarterly update on the implementation of the ESG strategy is included in the ECT2025 dashboard and presented to the Board of Directors / Board Strategy Committee.
• A more detailed report on the ESG Programme is presented to the Board of Directors on a quarterly basis. The ESG Dashboard is presented every 6 months.
• The Risk Dashboard is presented quarterly to the Board.

In 2024, BIL's Transition Plan was reviewed and approved in a dedicated meeting with the ExCo and the Board of Directors.

Developing ESG expertise within Governance bodies

To strengthen the governance and to ensure the management bodies have the adequate competencies to address ESG matters, the Executive Committee and Board received regular training on ESG topics. In 2024, the training included:

• A dedicated session on the amendments to the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD)
• A session focused on regulatory expectations related to diversity and best practices in the market
• A session that concentrated on green and transition financing, aligning with BIL's Transition Plan and climate targets

Consideration of Impacts, Risks and Opportunities

The administrative, management, and supervisory bodies at BIL actively consider impacts, risks, and opportunities related to sustainability when overseeing the Bank's strategy, major transactions, and risk management processes. The Board of Directors and the Executive Committee assess how sustainability initiatives fit within the Bank's overall strategy.

ESG risks are incorporated into the Bank's comprehensive risk management framework and are presented through both the ESG Dashboard and the Risk Dashboard. This enables the administrative, management, and supervisory bodies to review ESG-related risks during their regular assessments and to address potential challenges and seize opportunities effectively.

Material Impacts, Risks and Opportunities Addressed

During the reporting period, the administrative, management, and supervisory bodies focused on several short-term material impacts, risks, and opportunities related to sustainability:

1. ESG Training: Implemented training programs to enhance understanding of ESG principles across the organisation
2. Climate Risks and Financed Emissions: Evaluated the implications of climate risks and assessed the Bank's financed emissions
3. Evolution of Investment Decision Processes and ESG Integration: Reviewed the ongoing evolution of investment decision-making processes
4. Regulatory Compliance: Monitored evolving regulations related to sustainability
5. Implementation of ESG MiFID Requirements: Monitored the progress of implementing ESG requirements under the MiFID framework
6. EPC Collection Strategy: Discussed strategies for collecting Energy Performance Certificates
7. CSRD Preparation: Prepared for compliance with the Corporate Sustainability Reporting Directive

BIL's Remuneration Charter and associated practices are aimed at defining remuneration structures that protect the interests of its clients, suppliers, employees, and shareholders, while ensuring the Bank's financial sustainability over the long term.

For the majority of BIL's staff members, variable remuneration is discretionary and is determined based on a reference amount. The bonus reflects the outcomes of the year-end performance review. Incentive schemes are designed to foster a culture of accountability and performance, while also aligning with the Bank's core values of "caring, leading, engaging, accessible, and reliable".

BIL has established Environmental, Social, and Governance (ESG) objectives. These objectives are progressively cascaded down from the Executive Committee (ExCo) to people managers and relevant functions, such as those in the investment office. Performance is assessed from two perspectives:

• "What": This refers to specific targets, including a mix of individual, collective, financial, and non-financial targets.
• "How": This dimension considers adherence to BIL's values, emphasising care, compliance, and business ethics.

Sustainability-related performance metrics are included in both the "What" and "How" aspects of performance assessment. This ensures that while individual performance is measured, it does not incentivise behaviours that could lead to conflicts of interest. By avoiding purely quantitative commercial criteria, ethical decision-making aligned with the long-term goals of the Bank is encouraged.

At this stage, there is thus an indirect link between variable pay and sustainability-related targets, reflecting BIL's commitment to embedding ESG considerations into its performance evaluation processes.

Examples of ESG Objectives by Department:

Throughout the organisation, various departments are tasked with setting and achieving specific ESG objectives, including:

• Risk: Proactively managing ESG risks and integrating climate capabilities into existing frameworks.
• Procurement: Managing supply chain ESG risks by ensuring BIL does business with suppliers with consistent values and standards.
• IT: Deploying IT assets to help the rest of the firm develop innovative ESG products and respond to regulatory requirements, notably reporting.

Core Elements of Due Diligence

BIL has established a comprehensive risk management and internal control system specifically tailored for sustainability reporting. This system is governed by a centralised Sustainable Development Team that leads the sustainability reporting process and ensures compliance with relevant regulations.

Key components include:

Governance and Oversight

The ESG Strategic Steering Committee oversees the non-financial reporting process, providing regular updates to senior management, including the Executive Sponsor (Head of Strategy, SGO, and Balance Sheet Management) and the Executive Committee.

Timetable and Accountability

The Sustainable Development and Finance departments have developed a detailed timetable that outlines internal deadlines and identifies key contributors for the non-financial reporting process, ensuring accountability and timely delivery.

Internal Audit Assessment

The activities of the Bank have been split-up in 'audit units'. The list of all audit units is called the 'audit universe'. All audit units are included in the pluri-annual audit plan, scored and audited as foreseen in the methodology. The frequency of review is linked to the scoring of the audit unit that is calculated on a yearly basis through the risk assessment exercise. ESG is part of the audit universe. In 2024, the internal audit function assessed the risks and internal control systems relating to the production of BIL's Non-Financial Reporting (NFR), with findings reported to senior management to promote continuous improvement and accountability.

Risk Assessment Approach

The risk assessment approach on sustainability reporting involves a thorough evaluation of risks associated with non-financial reporting. Key risks are identified through discussions with internal and external auditors, as well as external ESG reporting experts. Periodic assessments of regulatory compliance are conducted to identify and address potential gaps effectively.

Key risks identified in the sustainability reporting process include:

• Data Accuracy and Completeness: Mitigated through a two-level control framework that ensures the reliability and timeliness of reported data. A dedicated reporting tool enhances data collection processes, including stakeholder identification and real-time monitoring.

• Regulatory Compliance Risks: Addressed by pursuing adherence to the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS), with external support utilised to close identified gaps.

• Governance Risks: Managed through the establishment of clear roles and responsibilities within the ESG governance structure, promoting accountability and effective oversight.

• Methodology Coherence: The methodology behind the Double Materiality Assessment is documented and periodically reviewed by both internal and external auditors to ensure consistency and transparency.

Integration and Reporting

The findings from risk assessments and internal controls are integrated into relevant internal functions through:

• Cross-Departmental Collaboration: Regular engagement meetings ensure that all stakeholders are aware of their responsibilities and adequately prepared for disclosures.

• Four-Eyes Control: Information undergoes validation through a hierarchical review process, ensuring accuracy and accountability at the N-1 level of Executive Committee.

• Regular Updates to the ESG Strategic Steering Committee: Progress on the reporting process and the CSRD project is communicated routinely to the ESG Strategic Steering Committee.

The results of risk assessments and internal controls are reported periodically to the administrative, management, and supervisory bodies through:

• Status of Internal Assessments: Updates on findings from internal audits are provided to ensure transparency and informed decision-making.

• External Assessment: A third-party external assurance provider conducted a gap assessment to evaluate overall compliance with the CSRD, assess the effectiveness of certain data collection processes, and ensure adherence to the EU Taxonomy.

This structured approach ensures that BIL's sustainability reporting is thorough, compliant, and effectively managed, fostering a culture of accountability and continuous improvement within the organisation.

Strategy, Business Model and Value Chain

Significant Groups of Products and Services Offering

Sustainable Financing Initiatives

Real Estate Financing

Green Loans

BIL currently offers two specific sustainable financing products:

• low-interest climate loans – loans subsidised by the Luxembourg government to encourage energy retrofitting; and
• renewable energies loans – special preferential rate loans to finance the installation of solar panels, heat pumps and geothermal systems (especially for retail clients).

However, most of BIL's sustainable financing comes through more traditional products such as mortgages and consumer loans for individuals, and business loans for corporate and institutional clients.

BIL is trying to progressively raise the quality of its non-financial data in order to better identify its sustainable financing in the future; for example, in 2024, better identification has been carried out internally to be able to allocate loans for energy renovation.

Energy Performance Certificate (EPC) Collection Process

From the last quarter of 2023, BIL has required an EPC for any new residential property used as a collateral to secure a loan. This document is mandatory, influences the credit rate and must be submitted before the loan is provided. In 2024, the emphasis has been placed on implementing a plan to remediate energy performance certificates from the stock of existing credits.

Motor Vehicle Financing

BIL supports e-mobility by offering special terms for the financing of 100% electric vehicles on both consumer loans for retail clients and on finance leases for business clients provided through BIL Lease.

Corporate Lending

Apart from the renewable energy loans, most of BIL's sustainable financing for corporate and institutional client comes through more traditional products such as business loans or finance leases. BIL is trying to raise the quality of its non-financial data in order to better identify its sustainable financing in the future. BIL has planned to define a green loan framework by 2025 in order to define what type of financing will be considered as sustainable and then determine how to flag them into its systems.

Responsible Investment Solutions

Responsible Investment Products

BIL is committed to develop its Responsible Investment (as per BIL's Sustainability Investment Framework) to clients with an interest in responsible investing.

BIL Luxembourg achieved a new milestone towards responsible investment practices by renewing its LuxFlag ESG Label accreditation for the BIL Invest Patrimonial, the BIL Invest Bonds EUR Corporate Investment Grade and the BIL Invest Equities Europe funds. Currently, six of BIL Invest's 17 in-house funds benefit from the LuxFlag ESG Label.

BIL Sustainability Investment Framework

In response to evolving ESG regulations, current market demand, and operational and data challenges, BIL established its Sustainability Investment Framework (SIF) in 2023, aligning with SFDR requirements. This framework aims to identify improvement areas to enhance compliance with regulatory guidelines when defining sustainable investments.

Markets in Financial Instruments Directive (MiFID)

In July 2024, BIL launched an updated version of its investor risk profile, which integrates the BIL sustainability questionnaire, replacing the previous separate questionnaire. This new approach enables automatic collection of clients' ESG preferences and classifies them into three sustainable profiles: neutral, moderate, or substantial.

BIL Green Bonds

In 2022, BIL was the first bank in Luxembourg to establish a Green Bond Framework dedicated to issuing green bonds. After a strong start with new issues in 2022, BIL Luxembourg has raised over EUR 500 million in Green Bonds since its launch by the end of 2024.

Markets and Customer Groups Served

BIL provides a broad range of services to meet the needs of its clients:

Retail Banking

Retail Banking serves the diverse retail and personal banking needs of both resident and non-resident individuals. BIL is represented in Luxembourg by a network of branches and advice centres located throughout the country.

Corporate & Institutional Banking (CIB)

CIB activities serve business owners, start-ups, small – medium – large companies, financial and non-financial institutions and public sector clients in Luxembourg and abroad.

Wealth Management

The Wealth Management business line provides financial and non-financial products and services to a wide range of clients, with a tailor-made approach.

Financial Markets

Financial Markets is primarily responsible for Balance Sheet Management which includes the Investment Portfolio, Treasury, Long-Term Funding and Asset and Liability Management (ALM).

BIL's Sustainability Strategy

BIL is committed to playing a strategic role in the transition to a sustainable world. BIL adheres to international sustainability frameworks, specifically committing to the United Nations Principles for Responsible Banking (UNPRB) and the United Nations Global Compact (UNGC).

In 2024, BIL established an ESG Charter that embodies BIL's dedication to sustainable banking practices that not only drive economic growth, but also contribute positively to society and the environment.

Specific goals include:

• Advance green and transition finance services: The Bank aspires to continue providing green and transition financing solutions that empower clients on their sustainability journeys.

• Integrate ESG factors across lending practices: The Bank aims to fully integrate Environmental, Social, and Governance (ESG) factors into its lending processes.

• Strengthen client engagement: The Bank aims to deepen its engagement with individual and corporate clients, providing tailored financing solutions and advisory services.

• Collect and analyse sustainability preferences: The Bank strives to establish a systematic approach to collecting and analysing clients' sustainability preferences.

• Enhance sustainable investment offerings: The Bank seeks to develop a comprehensive suite of sustainable investment products.

Value Creation

BIL actively engages with a diverse range of key stakeholders, which include clients (retail, wealth management, and corporate clients), employees of the BIL Group, suppliers, shareholders (notably Legend Holdings Corporation), non-profit organisations, governments and regulators, rating agencies and sustainability experts, supranational organizations focused on sustainability, and the Luxembourg Bankers' Association (ABBL).

Engagement with these stakeholders occurs regularly and is tailored to meet the specific needs of each group. For example, clients are engaged through relationship managers, branch offices, digital channels, and client satisfaction surveys. Employees provide feedback through regular feedback meetings, surveys like the Employee Net Promoter Score (E-NPS), and townhall meetings. Regulators and shareholders maintain open lines of communication regarding performance and expectations.

The organisation of this engagement is structured through various channels, ensuring that each stakeholder group has the opportunity to voice their opinions and concerns. This includes formal surveys, direct meetings, collaborative events, and ongoing communication through both digital and traditional platforms.

The outcomes of stakeholder engagement are systematically analysed and integrated into BIL's decision-making processes. Feedback received informs strategic adjustments and operational improvements, ensuring that the Bank remains responsive to its stakeholders. In response to stakeholder views, BIL has amended its strategy to develop sustainable financing solutions, enhance digital services, and improve employee health & well-being.

BIL incorporates the interests, views, and rights of its employees through inclusive policies, regular feedback mechanisms, and collaboration with unions and employee representatives. The Bank emphasises fair treatment, competitive remuneration, career development opportunities, and a healthy work environment, reflecting its values of caring and reliability. BIL integrates consumer interests and rights into its strategy by ensuring transparency in communications, providing access to financial education, and maintaining ethical banking practices.

The administrative, management, and supervisory bodies are regularly informed about stakeholder views and interests through specific and topic-related presentations done to the Executive Management (for e.g. client surveys, employee satisfaction, double materiality assessment, etc.).

BIL conducted a Double Materiality Assessment with the aim of identifying all material impacts, risks, and opportunities. The objective was two-fold: to confirm that the Bank's strategy and sustainability commitments are tackling issues that its stakeholders consider to be relevant and to identify any additional topics that are a priority for those stakeholders.

The assessment results were grouped and categorised into 12 material topics for clearer representation:

BIL's Material Impacts on the People and the Environment

Positive Impacts:

• Retail & Corporate Lending: By offering green loans to retail customers for energy-efficient home improvements, electric vehicles, and renewable energy installations, BIL supports the transition to a low-carbon economy. Similarly, the Bank's green loans to corporations for sustainable projects—such as renewable energy initiatives, green buildings, and sustainable supply chains—contribute to environmental sustainability and economic resilience.

• Investment Services: BIL provides investment solutions with an ESG focus, directing client funds towards projects and companies that support climate change mitigation and adaptation. This approach not only helps in reducing carbon footprints but also aligns investments with clients' sustainability preferences, ensuring that their financial goals are met in a responsible manner.

• Green Funding: Through the issuance of green bonds and other sustainable finance instruments, BIL directs funds towards projects that mitigate climate change and enhance resilience.

• Bank Portfolio Management: By allocating a portion of its own investment portfolio to sustainable investments, the Bank supports projects that promote climate resilience and reduce carbon emissions. Developing a sustainability-focused internal investment framework enhances long-term profitability by capitalising on the growing market for sustainable investments.

• Risk Management: Implementing climate risk management strategies reduces BIL's vulnerability to climate-related disruptions, ensuring the overall stability and resilience of the financial system. This proactive approach safeguards not only the Bank's assets but also those of its clients and stakeholders.

• Facilities Management: By adopting green building practices, the Bank enhances energy efficiency, reduces waste, and promotes a healthier environment—both for its employees and the communities in which it operates.

• Transparent Marketing and Communication: The Bank's effective marketing campaigns raise awareness about climate change and the importance of adaptation and mitigation efforts, encouraging customers to make environmentally friendly choices. By promoting sustainable practices, the Bank contributes to a broader cultural shift towards sustainability.

• Human Resources Practices: The Bank is committed to providing stable job opportunities, promoting diversity and inclusion, and upholding human rights practices. These initiatives contribute to employee development and satisfaction, while robust data protection measures safeguard employees' personal information and privacy.

• Client Centricity: Engaging in two-way communication with its clients allows the Bank to address their complaints and grievances effectively. This leads to better product and service offerings, enhancing client satisfaction and retention, and fostering long-term relationships built on trust.

• Compliance: Enforcing strict anti-corruption and anti-bribery policies maintains a fair and transparent working environment, while a strong anti-discrimination policy ensures equitable treatment of employees and clients.

Negative Impacts:

• Retail & Corporate Lending: Financing projects for high-emitting clients, thermal vehicles, or low energy-efficient houses contributes to financed GHG emissions, negatively impacting the environment.

• Bank Portfolio Management: Allocating investments into non-sustainable projects increases the Bank's financed emissions, undermining its sustainability goals.

• Facilities Management: The Bank's own operations, including buildings and travel, contribute to GHG emissions.

• Compliance: Extensive data collection can lead to privacy violations and misuse of personal information.

• IT: Increased reliance on digital platforms exposes the Bank and its customers to cyber threats and data breaches.

• Client Centricity: Absence of two-way engagement with clients can result in difficulty retaining them.

• HR Practices: Violating human rights can lead to dissatisfied workers, impacting employee satisfaction and retention.

The impacts vary in their time horizons. Actual impacts, such as those from current lending practices and investment services, are immediate. Potential impacts, like those from future green building practices and sustainability-focused investment frameworks, are expected to materialise over the medium to long term. The Bank's ongoing efforts in climate risk management and employee development also have long-term implications for stability and resilience.

The Bank is involved with these impacts through its direct activities and business relationships. For instance, retail and corporate lending directly influences financed emissions and the promotion of green projects. Investment services and green funding are connected to the Bank's strategy of directing client funds towards sustainable initiatives. The Bank's internal operations, such as facilities management and HR practices, also contribute to its overall environmental and social footprint. Additionally, the Bank's relationships with clients and stakeholders, including through client engagement and compliance policies, play a crucial role in shaping these impacts.

Interaction with Strategy and Business Model

The Bank recognises the increasing demand for sustainable client solutions, which impacts its service offerings and necessitates a shift in strategy to assist clients in transitioning to more sustainable practices. This commitment aligns with the Bank's dedication to conducting business responsibly while strategically growing to support the global economy. As part of this commitment, the Bank is enhancing its sustainability initiatives throughout its value chain to reduce the environmental impact of its operations. The demand for innovative and sustainable banking products shapes the Bank's product development strategy, driving efforts to create tailored solutions that meet client needs and align with sustainability goals.

The Bank actively integrates diversity and inclusion into all relevant operations, ensuring that its hiring practices and internal culture reflect these values. Additionally, the Bank is focusing on employee engagement, thus promoting a culture of caring, empathy, and open-mindedness.

In light of growing cybersecurity risks, the Bank acknowledges the need for robust data protection measures, influencing its decision-making regarding technology investments and data governance to safeguard user safety and privacy. To address this, the Bank is prioritising investments in cybersecurity infrastructure and employee training, ensuring that it is well-equipped to protect client data.

Moreover, the Bank is dedicated to upholding human rights across its employees, supply chain, and clients. In this context, the Bank is enhancing its engagement with suppliers to ensure they adhere to the same standards of human rights and ethical practices.

Fostering the skills and competencies of its employees is also a priority, enabling the workforce to better serve clientele and adapt to evolving market demands. The Bank is investing in employee development programs and training to enhance the capabilities of its team.

Resilience of BIL's Strategy and Business Model

BIL employs quarterly scenario analyses that assess various risks defined in the Bank Risk Taxonomy. These analyses not only help gauge the Bank's situation under potential future scenarios but also establish a basis for an additional Economic Capital Assessment (ECAP) buffer linked to ESG features. By closely monitoring these impacts, BIL aims to ensure resilience in its financial position, performance, and cash flows.

No material risk or opportunity presents a significant risk of a material adjustment within the next annual reporting period to the carrying amounts of assets and liabilities reported in the related financial statements.

Under European Central Bank (ECB) Supervisory expectations relating to business models and strategy, regulatory expectations were addressed through the identification and assessment of material risks: building a robust risk management framework, using scenario analysis and stress testing, strengthening risk corporate governance to ensure board-level oversight of climate risks and compliance with evolving regulations.

• BIL annually conducts its Global Risk Cartography, integrating an ESG risk mapping exercise, with the objective of identifying the transmission channels for climate-related risk drivers, social and governance risk drivers on financial and non-financial risks, considering a medium and long-term horizon.

• BIL applies ESG stress testing scenarios to identify potential weaknesses in its exposure across different activity sectors, challenges the business strategy and provides quarterly a high-level view of the impacts of ESG drivers on credit, market, liquidity and non-financial risks to the Bank's Management bodies.

• Since 2023, BIL developed an ESG Dashboard to monitor the impact of climate change and environmental degradation, providing a global overview on the Lending portfolio, Bank Investment Portfolio, Client Investment Portfolio, its carbon footprint and its climate targets.

• In the context of the Bank's Risk Appetite Framework (RAF), BIL classifies its loan book exposures according to SASB criteria, taking into account ESG features, with a focus on those subject to Biodiversity Risk and losses. These assessments are included in the Global Risk Dashboard and presented quarterly to the Management.

In September 2024, the Board of Directors approved new indicators and limits related to Transition and Physical risks for the Residential and Commercial Real Estate Portfolio as part of the Risk Appetite Statement. These indicators will help monitor and manage risks associated with energy performance and collateral classifications, ensuring alignment with environmental standards. Additionally, in December 2024, new ESG risk indicators were validated, focusing on exposure to ESG bonds, concentration in top emitting sectors, and the impact of ESG factors on non-financial risks.

The Bank regularly focuses on technological innovations and maintaining an agile business model in order to quickly respond to market and regulatory changes while taking advantage of identified opportunities.

The Double Materiality Assessment with the aim of identifying all material impacts, risks, and opportunities. As part of the financial materiality exercise, BIL evaluated how sustainability issues affect the Bank's financial performance and value, including risks and opportunities related to ESG topics. BIL considered the ESG risk scenarios developed as part of BIL's Risk Cartography exercise as well as ESG opportunities for the Bank.

The assessment was structured around impact materiality and financial materiality exercises:

Impact Materiality Assessment

For the impact materiality assessment, a questionnaire was prepared and sent to diverse stakeholders including employees from Management, Risk, Operations, HR, Legal, Procurement, IT, Sustainable Development, Investment and Strategy departments. The employees from BIL's subsidiaries also took part in assessing the impact materiality of topics. The questionnaire consisted of a list of 23 pre-defined ESG topics along with multiple examples of positive and negative impacts arising from BIL's own-activities or as a result of its business relationships (upstream or downstream value chain). Each stakeholder gave a score on every ESG topic based on Scale, Scope, Irremediability (for negative impacts only) and Likelihood on a range from 1 to 4. The scores given on the 4 axes (Scale, Scope, Irremediability, Likelihood) were added to give a consolidated score for each topic in a range from 4 to 16 for positive impacts and 5 to 20 for negative impacts.

Financial Materiality Assessment

For the financial materiality assessment, the questionnaire was sent to stakeholders from departments that are most likely to be impacted by sustainability topics. These included Management, Risk, Strategy, Investment, Sustainable Development and Operations. In the questionnaire, the stakeholders were asked to give a score to different ESG risks and opportunities on a Scale ranging from 1 to 4 (from low to very high) and a score on Likelihood ranging from 1 to 4 (from very unlikely to very likely). Then for each topic, a consolidated score was calculated by multiplying the average Score and the average Likelihood, resulting in a range from 1 to 16.

Materiality Assessment Results

A consolidated materiality matrix was prepared based on the results of both exercises. The final selection of material topics considered both the quantitative results of the survey and the qualitative inputs from stakeholders discussions. The materiality thresholds for impact and financial materiality were established through an iterative process that took into account the opinion of the Bank's senior management and involved reviewing the distribution of scores to identify natural cut-off points and significant gaps in the scoring. Different thresholds were tested to ensure that the final selection of material topics was representative, balanced and actionable.

The assessment results were grouped and categorised into 12 material topics. The methodology ensured a comprehensive evaluation that considered both quantitative and qualitative factors, incorporating diverse stakeholder perspectives and aligning with regulatory expectations.

Energy Consumption and Mix

Own Energy Consumption

BIL's energy consumption includes electricity, natural gas, diesel for backup generators, and fuel consumption for company vehicles. The energy data collection covers BIL Luxembourg, BIL Suisse, and BMI.

Key Initiatives

Renewable Energy Usage BIL's headquarters building is powered by 100% renewable electricity. The renewable electricity consumption for 2024 includes electricity consumption from BIL's headquarters building, some facilities at BIL Suisse, and BMI offices.

Energy Efficiency Measures

• Implementation of energy-efficient LED lighting systems across facilities
• Smart building management systems to optimise heating, ventilation, and air conditioning
• Regular energy audits to identify improvement opportunities
• Promotion of energy-saving practices among employees

Vehicle Fleet Transition BIL continues its transition to electric and hybrid vehicles for its company fleet, contributing to reduced fuel consumption and lower emissions.

GHG Emissions

BIL's Operational Emissions

Scope 3 Emissions

BIL reports selected Scope 3 emissions categories that are most relevant to its business operations:

BIL's Financed Emissions

As a financial institution, BIL recognises that its most significant climate impact comes through its lending and investment activities (financed emissions).

Emission Intensity Metrics

Methodology and Data Quality

Operational Emissions Methodology

• Scope 1 and 2 emissions calculated using location-specific emission factors where available
• Market-based Scope 2 approach uses supplier-specific emission factors for renewable energy contracts
• Scope 3 emissions calculated using spend-based methodology for purchased goods and services
• Business travel emissions include flights, hotels, and ground transportation
• Employee commuting emissions estimated based on employee surveys

Financed Emissions Methodology

• Residential real estate: Energy Performance Certificate (EPC) data used where available, with proxy methodologies for properties without EPCs
• Corporate lending: Sector-based approach using PCAF methodology and emission factors
• Portfolio coverage represents the percentage of financed emissions that could be calculated based on available data

Data Quality Improvements

• Figures from 2022 and 2023 operational GHG emissions have been amended due to implementation of a new calculation tool
• 2022 financed GHG emissions have been updated due to adjustments in calculations
• Ongoing efforts to improve data collection, particularly Energy Performance Certificates for real estate portfolio
• Regular validation of emission factors and calculation methodologies

Training and Skills Development Metrics

Training Hours

Training by Category

BIL provides comprehensive training programs across various categories:

Professional Development

• Technical skills training related to banking operations
• Regulatory compliance training
• Leadership and management development programs
• Language training to support international client base

ESG and Sustainability Training

• ESG principles and sustainable finance
• Climate risk management
• Responsible investment practices
• Environmental awareness programs

Technology and Digital Skills

• Cybersecurity awareness training (216 employees trained)
• Digital banking platforms and tools
• Data protection and privacy training
• Innovation and digitalisation workshops

Compliance and Risk Management

• Anti-money laundering (AML) training
• Know Your Customer (KYC) procedures
• Risk management frameworks
• Business conduct and ethics

Training Delivery Methods

In-Person Training

• Classroom-based sessions
• Workshops and seminars
• On-the-job training and mentoring

Digital Learning Platforms

• E-learning modules
• Virtual training sessions
• Online certification programs
• Webinars and digital conferences

External Training and Education

• Professional certification programs
• Industry conferences and seminars
• University partnerships for advanced education
• Cross-industry learning initiatives

Training Investment

BIL demonstrates its commitment to employee development through significant investment in training and development programs. The Bank recognises that continuous learning is essential for maintaining competitiveness, ensuring regulatory compliance, and supporting career progression.

Skills Development Initiatives

Career Development Programs

• Individual development planning
• Succession planning initiatives
• Cross-functional project assignments
• Mentorship and coaching programs

Specialised Training Programs

• Training courses for relationship managers in climate change adaptation and mitigation
• ESG training for investment professionals
• Digital transformation training for all employees
• Customer service excellence programs

Continuous Improvement

• Regular assessment of training effectiveness
• Employee feedback on training programs
• Adaptation of training content to meet evolving business needs
• Integration of new technologies in training delivery

The Bank's commitment to employee development is reflected in the high average training hours per employee, demonstrating its investment in building capabilities and ensuring employees can effectively serve clients while adapting to evolving market demands and regulatory requirements.