EnBW Energie Baden Württemberg : Green Financing Framework 2021

EnBW Green Financing Framework

Index
1. Introduction.........................................................................................................................	3
1.1	Sustainability Approach of EnBW ................................................................................	3
1.2	Rationale for Green Financing.....................................................................................	5
1.3	Mapping of Eligible Activities and Compliance with the EU Taxonomy.......................	6
1.4	Alignment with the (Draft) European Green Bond Regulation ....................................	9
2. Scope of the Framework...................................................................................................	10
2.1	Use of Proceeds.........................................................................................................	11
2.2	Project Evaluation and Selection...............................................................................	11
2.3	Management of Proceeds..........................................................................................	13
2.4	Reporting ...................................................................................................................	14
2.5	External Review .........................................................................................................	16
Sources	.....................................................................................................................................	17

The Green Financing Framework will be updated regularly. All substantial changes will be documented below:

Date of Change	Section	Amendment
August 2021	1.1	Integration of the EnBW 2025 strategy
	1.2	Integration of the climate neutrality target, important
		corner stones of the 2025 strategy and compliance with
		the EU Taxonomy Regulation
	1.4	Integration of the section 1.4 Alignment with the (Draft)
		European Green Bond Regulation
	2	Reference to the latest versions of the ICMA Green
		Bond Principles and the LMA Green Loan Principles.
		Commitment to be aligned with the EU Green Bond
		Standard.
	2.2	Integration of the EU Taxonomy criteria

The EnBW Green Financing Framework was published in October 2018 and last updated in August 2021.

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1. Introduction

Since 2013 we have been following the EnBW 2020 Strategy with the majority of our investments focusing on renewable energies and grids. After the conclusion of the 2020 reporting year - the strategy horizon - we aim to transform our company into a sustainable and innovative infrastructure partner for our customers and other stakeholders under the EnBW 2025 strategy. In line with this strategy, we are investing more and more in climate-friendly growth projects. For this reason, we plan to invest a total of around €12 billion between 2021 and 2025, 80% of which will be spent on growth projects (focusing on grid expansion, renewables and smart infrastructure). In addition, we aim to reduce our CO2 emissions to net zero by 2035. On the way there, we are also going beyond the traditional boundaries of the energy sector in order to develop new growth areas, such as urban infrastructure, that means smart interconnection of - for example - energy, transport, telecommunication and security in the public arena. Alongside the technical aspects of new urban districts, we consider it important to make them liveable, social and sustainable.

Going forward, wind and solar installations, green power products, sustainable urban districts with advanced charging infrastructure for electric vehicles, distributed energy generation and energy storage will comprise building blocks of sustainable infrastructure, most of which we will implement with Green Finance.

1.1 Sustainability Approach of EnBW

The EnBW 2025 strategy is based - just like the EnBW 2020 strategy - on a holistic approach to stakeholders. It defines specific financial and sustainability targets that take account of the economic, ecological and social dimensions of sustainability.

One central theme of our sustainable corporate strategy is climate protection and we have set ourselves an ambitious goal in this regard: We would like to become climate neutral with respect to our own emissions (Scope 1 and 2) across the whole company by 2035. We aim to reduce the CO₂ emissions by 50% by 2030, based on the reference year of 2018. The path to climate neutrality will require the rigorous phasing out of coal-fired generation. According to the Coal Phase-out Act approved by the German parliament in 2020, this process must be completed by 2038. We had already phased out 40% of our particularly carbon-intensive electricity generation before the Coal Phase-out Act was passed in 2020. A further 2.5 GW will be removed from operation by 2030 and the phase-out process will be fully completed by 2035 the latest. To this end, the fuel switch options will be examined. The fuel switch will take place in two stages: firstly from coal to more climate-friendly gas and then in the medium term to climate-neutral gas (biogas or hydrogen). Switching raw materials in this way will not only contribute to maintaining a reliable energy supply but will also help to preserve existing power plant sites.

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Reduction of CO2 emissions to net zero1

1 Our climate neutrality target relates to our own emissions (scope 1 and 2). The target relates to CO2eq (CO2, CH4, N2O and SF6) and the base year 2018. It includes some offsetting of remaining residual emissions by purchase of recognised offsetting certifi- cates.

Climate impact is a major factor for strategic decision making. The EnBW key indicator CO2 intensity is calculated based on our Group's greenhouse gas emissions of electricity generation - once with, once without the inclusion of nuclear energy. The latter is done to make the influence of nuclear energy visible, which, however, will no longer be part of our portfolio after 2022. For the period 2015 to 2020, our target was to reduce the CO2 intensity of our own generation of electricity (excluding nuclear power) by 15 to 20 percent compared to 606 g/kWh in 2015. We were able to clearly exceed this target with a reduction of 39% and a resulting CO2 intensity of 372 g / kWh in 2020. Our target for 2025 is a 15% to 30% reduction compared to the base year 2018.

The expansion of renewable energies is an important part of our strategic journey. Our investments in climate-friendly energy supply are significant. We plan to expand the installed capacity of renewable energies to 6.5 - 7.5 GW and the share of the generation capacity to more than 50% by 2025. Our focus will be on offshore wind power, onshore wind power and PV. The generation capacity of our wind power plants is due to increase to 4.0 GW by 2025 and our portfolio of photovoltaic projects to 1.2 GW. Regarding our onshore and offshore wind portfolio this makes us one of the largest wind energy investors in Germany. In addition, we intend to expand our international commitment in the field of renewable energies in the coming years.

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Expansion of renewable energies in the generation mix

1.2 Rationale for Green Financing

Decarbonisation calls for a comprehensive structural transformation cutting across all sectors of the economy. This also determines the way forward for us in our business activities. We are committed to actively supporting the Paris Climate Agreement and the resulting decarbonisation targets of the EU and Germany.

Since we have started our transformation in 2013, we have been repositioning our business profile from a traditional utility with the majority of earnings coming from conventional power generation towards a company where the organisation as a whole, strategically as well as operationally, is working towards becoming a renewable energies generator and infrastructure provider. Our grid operators for transmission and distribution grids connect renewable energy capacities to the grid as well as optimise the grid towards the needs of sustainable generation and e-mobility. We develop, build and operate both on- and offshore wind farms with a pipeline for future projects. Additionally, we focus on customer products in connection with sustainable transportation solutions, energy savings and smart cities.

We are transforming ourselves into a sustainable and innovative infrastructure partner with a focus on three key investment areas:

• Sustainable generation infrastructure: expansion of low carbon electricity gener- ation, decarbonisation activities in relation to coal-based generation and phasing out of nuclear energy.
• System-criticalinfrastructure: expansion and operation of transmission grids and upgrading of distribution grids as well as grid-related services.
• Smart infrastructure for customers: development of new, digital business mod- els, launching them onto the market and scaling them up.

With our Green Financing Framework, we intend to not only work towards sustainability on the asset side, but also on the liabilities side of the balance sheet. We believe that bringing together sustainable financing and sustainable investment projects will be beneficial to all stakeholders.

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