First Abu Dhabi Bank P J S C : FAB Sustainable Finance Framework 2022

FAB SUSTAINABLE FINANCE FRAMEWORK 2022

TABLE OF CONTENTS

1.	FAB'S APPROACH TO SUSTAINABLE FINANCING	3
2.	FAB'S SUSTAINABLE FINANCE FRAMEWORK	4
3.	DEDICATED PURPOSE FINANCING	6
	3.1 ISSUING GREEN, SOCIAL SUSTAINABILITY BONDS	6
		3.1.1	USE OF PROCEEDS	7
		3.1.2 PROCESS OF PROJECT EVALUATION AND SELECTION	8
		3.1.3	MANAGEMENT OF PROCEEDS	9
		3.1.4	REPORTING	10
4.	GENERAL PURPOSE FINANCING	11
	4.1	COMPANY PROFILE	11
	4.2	SUSTAINABILITY LINKED INSTRUMENTS	12
		4.2.1 ISSUING SUSTAINABILITY LINKED BONDS	12
			4.2.1.1 KEY PERFORMANCE INDICATORS (KPIs)	13
			4.2.1.2 PREDEFINED SUSTAINABILITY PERFORMANCE TARGETS (SPTs)	13
			4.2.1.3 SUSTAINABILITY LINKED BOND CHARACTERISTICS	13
			4.2.1.4 REPORTING	13
			4.2.1.5 VERIFICATION	13
		4.2.2	SUSTAINABILITY LINKED LOANS	14
5.	ELIGIBLE ACTIVITIES FOR SUSTAINABLE FINANCING	15
6.	SAMPLE OF ELIGIBLE KPI FOR SUSTAINABILITY LINKED INSTRUMENTS	23
7.	TRANSITION FINANCE	25
8.	EXCLUSIONS	27
9.	EXTERNAL REVIEW AND VERIFICATION	28
10.	PRODUCT SCOPE	29
11.	REFERENCES	30

2

1. FAB'S APPROACH TO

SUSTAINABLE FINANCING

In 2021, we launched our new Environmental Social & Governance (ESG) Strategy designed to accelerate our growth in areas that are most pertinent to emerging sustainability opportunities and challenges. As part of our strategy, we have committed to lend, invest and facilitate business of USD 75 billion by 2030 to activities focused on environmental and socially responsible solutions.

Our approach to sustainability is guided by three pillars: Transforming our Governance Model, Transitioning to a Low Carbon Future and Capitalising on our Social Responsibility. All three pillars ultimately support FAB's goal of sustainable financial performance by creating new business opportunities and reducing risk. FAB is also part of the Net Zero Banking Alliance (NZBA) and as part of our commitment, we will assist our clients to transition towards a climate-neutral economy through innovative financing and advisory services. Working with our customers, we will fund sustainable growth that will accelerate the Net Zero transition and expand financial services for all while fostering diversity, accountability, and transparency within the organisation. For further details on FAB's Sustainability Strategy and Roadmap to Net Zero, please refer to our Annual ESG Report here: About FAB | First Abu Dhabi Bank - UAE (bankfab.com).

Our Sustainable Financing Framework defines our classification approach and methodology for allocating FAB's financial products and services (including but not limited to debt and equity capital markets, corporate lending and consumer lending or Islamic Finance) as sustainable or transition finance to support activities and products aimed at addressing environmental and socially responsible issues.

The framework has been introduced in the sections below.

3

2. FAB'S SUSTAINABLE

FINANCE FRAMEWORK

Application:

The Sustainable Finance Framework ("the framework") outlines FAB's methodology for classification of financial products and services as sustainable or transition finance. It also serves to guide the development of sustainable products which reference a specific green, social or sustainable use of proceeds.

Our Framework has been broadly divided to cover the following three areas:

• Dedicated Purpose Financing
• General Purpose Financing
• Transition Finance

Classification Logic:

The simplified classification logic shows the process of classifying transactions as sustainable or transition finance. Under this framework, any financing (including but not limited to debt and equity capital markets, corporate lending and consumer lending or Islamic Finance) can be classified as sustainable or transition finance.

Refer to Section 10 for further details on the product scope.

		Proposed
		transaction
Dedicated purpose financing		General purpose financing
Are the proceeds		Are 90% of the
	company's revenue
linked to a direct
	derived from
environmental or
	sustainability related
social impact?
	activities?
	Yes

Transition Finance

Can the assets be qualified under our transition finance activities?

Use of proceeds are

No

Yes

No

Yes

compliant with the

environmental social

Does the asset

eligibility criteria?

Is it a sustainability

Classify as

No

linked facility ?

sustainable

align with

principle

of 'do no harm'?

No

Yes

Yes

Yes

Do not classify as

Classify as

No

sustainable

sustainable

No

Do the SPTs meet

No

Is in the

process of

developing

a credible

the eligibility

criteria?

climate transition

No

strategy?

Yes

Yes

Do not classify

Classify as

Do not classify as

Classify as transition

as sustainable

sustainable

transition finance

finance

4

Governance:

FAB has a dedicated ESG and Sustainable Finance Committee (ESG-SFC) who are responsible for assessing and classifying finances as sustainable or transition in compliance with the requirements of this framework. Every transaction in the bank is reviewed from an ESG perspective before credit approval, which includes assessment for ESG risks as defined in FAB's ESG Risk Framework and Policy, after which it undergoes additional review for eligibility to be classified as sustainable finance based on the classification criteria

set out in this framework. All qualifying transactions continue to undergo periodic due diligence checks (quarterly for projects associated with sustainability bonds and annual for all others). During our due diligence checks, any transaction which is found to no longer meet the minimum requirements set out in this framework are disqualified and material changes are disclosed in our annual reports.

For further details on our governance structure and ESG Risk Framework and Policy that governs ESG Risk Management across the bank, please refer to our Corporate ESG Report available here: Sustainable Finance & Reports | First Abu Dhabi Bank (FAB) - UAE (bankfab.com).

Reporting:

This Framework is FAB's basis for tracking and reporting our performance against our sustainable finance commitment to lend, invest, and facilitate business of USD 75 billion by 2030 to activities focused on environmental and socially responsible solutions. Annual update on progress against target and any sustainable financing classifications based on this framework will be reported by FAB annually in our Sustainable Finance Report and ESG Report. Although this framework enables us to classify and label qualifying financing under 'transition finance', this is not included as progress against our sustainable financing target and will be reported separately.

Alignment to Market Standards:

The Framework has been prepared with reference to the core principles and recommendations of the following market standards:

• International Capital Market Association's (ICMA) Green Bond Principles (GBP)
• International Capital Market Association's (ICMA) Social Bond Principles (SBP)
• International Capital Market Association's (ICMA) Sustainability Bond Guidelines (SBG)
• International Capital Market Association's (ICMA) Sustainability-Linked Bonds (SLB)
• International Capital Market Association's (ICMA) Climate Transition Finance Handbook
• Loan Market Association's (LMA) Green Loan Principles (GLP)
• Loan Market Association's (LMA) Social Loan Principles (SLP)
• Loan Market Association's (LMA) Sustainability-Linked Loan Principles (SLLP)
• Climate Bond Initiative (CBI) Taxonomy
• International Finance Corporation (IFC) Standards
• European Union (EU) Taxonomy

5

External Verification:

The framework is dynamic in its nature and will be regularly reviewed and expanded as required to amend or add additional qualifying activities and/or criteria, and to fulfil regulatory requirements. FAB will obtain additional external verification on any material updates made during periodic reviews.

A second party opinion (SPO) from ISS Corporate Solutions has been obtained on FAB's 2022 Sustainable Finance Framework. ISS ESG is one of the world's leading rating agencies in the field of sustainable investment. The agency analyses companies and countries regarding their environmental and social performance basing their assessment on current market practices for sustainable capital markets referring to different market standards and voluntary guidelines.

The SPO will be published on FAB's Sustainable Finance web page, available here: Sustainable Finance & Reports| First Abu Dhabi Bank (FAB) - UAE (bankfab.com).