Grenergy Renovables S A : Second Party Opinion de Sustainalytics sobre el Marco de Financiación Verde

Second-Party Opinion

Grenergy Green Finance Framework

Evaluation Summary

Sustainalytics is of the opinion that the Grenergy Green Finance Framework is credible and impactful and aligns with the four core components of the Green Bond Principles 2021 and the Green Loan Principles 2021 (the "Principles"). This assessment is based on the following:

Grenergy intends to use the proceeds from issuances to finance projects in one category, Renewable Energy. Sustainalytics notes that the positive impact of expanding renewable energy capacity and considers that the eligible investments will contribute to advancing UN Sustainable Development Goals, specifically SDG 7.

Grenergy's internal process in evaluating and selecting projects is managed by the Management Committee, which is comprised of the CEO, CFO, Merger and Acquisition (M&A) Director, Investor Relations and Communication Director, and Head of the Legal Department. Grenergy's risk assessment and mitigation process are applicable to all allocation decisions made under the Framework. Sustainalytics considers these environmental and social risk management processes to be adequate and aligned with market expectation.

The proceeds of Grenergy's green finance instruments will be credited to a separate account and managed by the Treasury team, under the supervision of the CFO. Pending full allocation, the proceeds may be temporarily invested in Grenergy's treasury liquidity portfolio, in the form of cash and/or cash equivalents. This is aligned with market practice.

Grenergy intends to report on the allocation and impact of proceeds on its website on an annual basis until full allocation. Grenergy's Sustainability Report will provide allocation reporting including the total amount of investments and expenditures in renewable energy, the amounts or shares of proceeds allocated to general corporate expenses and M&A operations, as well as the balance of unallocated proceeds. Grenergy has also committed to reporting on relevant impact metrics. Sustainalytics views Grenergy's allocation and impact reporting as aligned with market practice.

Evaluation date	August 26, 2021
Issuer Location	Madrid, Spain
Report Sections
Introduction ................................................	2
Sustainalytics' Opinion...............................	2
Appendices.................................................	8

For inquiries, contact the Sustainable Finance Solutions project team:

Jhankrut Shah (Toronto) Project Manager [e-mail] ([phone]

Aoife McCarthy (Amsterdam)

Project Support

Darshna Jha (Mumbai)

Project Support

Keerthana Gopinath (Mumbai)

Project Support

Enrico Tessadro (Amsterdam) Client Relations [e-mail] ([phone]

© Sustainalytics 2021

Second-Party Opinion

Grenergy Green Finance Framework

Introduction

Grenergy Renovables SA ("Grenergy", or the "Company") is an independent power producer with operations in the development, construction, operation and maintenance of solar and wind energy projects. Founded in 2007 and headquartered in Spain, the Company also operates in Mexico, Chile, Peru, Colombia, Argentina, UK, Spain and Italy.

Grenergy has developed the Grenergy Green Finance Framework (the "Framework") under which it intends to issue debt instruments such as green bonds, loans and promissory notes and use the proceeds to finance or refinance, in whole or in part, existing or future projects that are expected to increase the share of renewable energy.. The Framework defines eligibility criteria in one area:

1. Renewable Energy

Grenergy engaged Sustainalytics to review the Grenergy Green Finance Framework, dated July 2021, and provide this Second-Party Opinion on the Framework's environmental credentials and its alignment with the Green Bond Principles 2021 (GBP)1 and the Green Loan Principles 2021 (GLP).2 The Framework has been published in a separate document.3

Scope of work and limitations of Sustainalytics' Second-Party Opinion

Sustainalytics' Second-Party Opinion reflects Sustainalytics' independent4 opinion on the alignment of the reviewed Framework with the current market standards and the extent to which the eligible project categories are credible and impactful.

As part of the Second-Party Opinion, Sustainalytics assessed the following:

• The Framework's alignment with the Green Bond Principles 2021, as administered by ICMA, and the Green Loan Principles 2021, as administered by LMA, APLMA and LSTA5;
• The credibility and anticipated positive impacts of the use of proceeds; and
• The alignment of the issuer's sustainability strategy and performance and sustainability risk management in relation to the use of proceeds.

For the use of proceeds assessment, Sustainalytics relied on its internal taxonomy, version 1.10, which is informed by market practice and Sustainalytics' expertise as an ESG research provider.

As part of this engagement, Sustainalytics held conversations with various members of Grenergy's management team to understand the sustainability impact of their business processes and planned use of proceeds, as well as management of proceeds and reporting aspects of the Framework. Grenergy representatives have confirmed (1) they understand it is the sole responsibility of Grenergy to ensure that the information provided is complete, accurate or up to date; (2) that they have provided Sustainalytics with all relevant information and (3) that any provided material information has been duly disclosed in a timely manner. Sustainalytics also reviewed relevant public documents and non-public information.

This document contains Sustainalytics' opinion of the Framework and should be read in conjunction with that Framework.

Any update of the present Second-Party Opinion will be conducted according to the agreed engagement conditions between Sustainalytics and Grenergy.

Sustainalytics' Second-Party Opinion, while reflecting on the alignment of the Framework with market standards, is no guarantee of alignment nor warrants any alignment with future versions of relevant market standards. Furthermore, Sustainalytics' Second-Party Opinion addresses the anticipated impacts of eligible projects expected to be financed with bond and loan proceeds but does not measure the actual impact. The

1. The Green Bond Principles are administered by the International Capital Market Association and are available at:https://www.icmagroup.org/assets/documents/Sustainable-finance/2021-updates/Green-Bond-Principles-June-2021-100621.pdf
2. The Green Loan Principles are administrated by the Loan Market Association, Asia Pacific Loan Market Association and Loan Syndications and Trading Association, and are available at:https://www.lma.eu.com/application/files/9716/1304/3740/Green_Loan_Principles_Feb2021_V04.pdf
3. The Grenergy Green Finance Framework is available on Grenergy Renovables SA's website at:https://grenergy.eu/en/
4. When operating multiple lines of business that serve a variety of client types, objective research is a cornerstone of Sustainalytics and ensuring analyst independence is paramount to producing objective, actionable research. Sustainalytics has therefore put in place a robust conflict management framework that specifically addresses the need for analyst independence, consistency of process, structural separation of commercial and research (and engagement) teams, data protection and systems separation. Last but not the least, analyst compensation is not directly tied to specific commercial outcomes. One of Sustainalytics' hallmarks is integrity, another is transparency.
5. In addition to the Loan Markets Association, the GLP are also administered by the Asia Pacific Loan Market Association and the Loan Syndications and Trading Association.

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Grenergy Green Finance Framework

measurement and reporting of the impact achieved through projects financed under the Framework is the responsibility of the Framework owner.

In addition, the Second-Party Opinion opines on the potential allocation of proceeds but does not guarantee the realised allocation of the bond and loan proceeds towards eligible activities.

No information provided by Sustainalytics under the present Second-Party Opinion shall be considered as being a statement, representation, warrant or argument, either in favour or against, the truthfulness, reliability or completeness of any facts or statements and related surrounding circumstances that Grenergy has made available to Sustainalytics for the purpose of this Second-Party Opinion.

Sustainalytics' Opinion

Section 1: Sustainalytics' Opinion on the Grenergy Green Finance Framework

Sustainalytics is of the opinion that the Grenergy Green Finance Framework is credible and impactful, and is aligned with the four core components of the GBP and GLP. Sustainalytics highlights the following elements of the Framework:

Use of Proceeds:

• The eligible category, Renewable Energy, is aligned with those recognized by the GBP and GLP.
• Grenergy intends to use the issuances under this Framework to finance the growth of its portfolio either by directly financing projects that make part of its business expansion or through merger and acquisitions of companies engaged in activities that comply with the criteria set forth in the Framework.
• • Storage technologies include electrochemical storage, such as battery energy storage systems and chemical storage in the form of green hydrogen produced from renewable energy.
• Sustainalytics is of the opinion that the investments financed by issuances under this Framework will deliver positive environmental impact in the markets in which Grenergy operates and that financing projects with the specified technologies is aligned with market practice.

Project Evaluation and Selection:

• Grenergy's Management Committee will run an internal process for evaluation and selection of eligible projects. The Management Committee is comprised of the CEO, CFO, M&A director, the director of investor relations and communication, and the head of the Legal Department.6
• Grenergy has a risk assessment and mitigation process in place which will apply to all allocation decisions made under the Framework, and includes financial, environmental, technical, legal, and social analyses. Sustainalytics considers this process to be adequate and aligned with market expectation. For additional, details see Section 2.
• Based on the management committee's stewardship under the Framework, Sustainalytics considers this process to be in line with market practice.

Management of Proceeds:

• The proceeds of the green finance instruments issued under the Framework will be credited to a dedicated account and managed by Grenergy's treasury team, under the supervision of the Company's CFO. This process is aligned with market practice.
• Pending full allocation, the proceeds may be temporarily invested in Grenergy's treasury liquidity portfolio, in the form of or cash equivalents.
• Grenergy intends to allocate net proceeds from bonds to eligible projects within three years of issuance, which aligns with the GBP.
• Based on the processes for tracking, allocation timeframe and temporary use of proceeds, Sustainalytics considers this process to be in line with market practice.

6 Grenergy website, "Governing bodies", at: http://grenergy.eu/en/governing-bodies/

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Reporting:

• Grenergy intends to report on the allocation of proceeds and associated impact metrics on its annual sustainability report until full allocation. The report will include the total amount of investments and expenditures in green projects of renewable energy, the amounts or percentages of proceeds allocated to general corporate expenses and M&A operations, as well as the balance of unallocated proceeds.
  Impact reporting will include impact metrics such as including the increase in production of renewable energy (MW), the increase in production of renewable energy (MWh), and the annual GHG emissions avoided by the projects in operation (tCO2e).
• Based on the commitment to allocation and impact reporting, Sustainalytics considers this process to be in line with market practice.

Alignment with Green Bond Principles 2021 and Green Loan Principles 2021

Sustainalytics has determined that the Grenergy Green Finance Framework to be aligned with the four core components of the GBP and GLP. For detailed information, please refer to Appendix 1: Green Bond/Green Bond Programme External Review Form.

Section 2: Sustainability Performance of Grenergy

Contribution of Framework to Grenergy's sustainability strategy

Grenergy is an independent renewable energy producer focusing on development, construction, operation and maintenance of large-scale wind and solar plants. Grenergy has been operating in this market since its inception in 2007. As of 2021, the Company has solar and wind operations in the EU in Spain and Italy, as well as in the UK, Mexico, Chile, Peru, Colombia and Argentina.Error! Bookmark not defined. The Company's projects have a combined operational output of 198 MW and an additional 300MWp of capacity under its management.7

Grenergy formulated its ESG Roadmap 2021-2023 by first carrying out a materiality assessment, which identified the top ESG priorities among stakeholders. This assessment was then used to determine objectives for the Company's Sustainability Policy8 and to identify key areas of focus. The Company's ESG Action Plan 2021,10 overseen by its Sustainability Committee, includes objectives related to governance, business strategy, risk management, and impacts. 10 The ESG Action Plan 2021 also includes policies on sustainability, human rights, procurement, harassment, gender equality and a social action plan, as well as a commitment to report quarterly on progress made in areas that include environmental and social risk management, mitigation measures and plans reassessed. 10

The Company reports on its scope 1 and scope 2 GHG emissions, in accordance with the GHG Protocol Corporate Standard9 and obtains independent verification on this reporting. Under Grenergy's ESG Action Plan 2021. the Company aims to reduce total scope 1 and 2 emissions by 55% (1.98tCo2 GWh) before 2030. This target will be achieved through reducing the emissions needed to generate electricity, by changing the electricity supply to renewable sources, replacing the Company's car fleet to hybrid or electric models and adopting other energy efficiency measures.10 Grenergy's second goal in line with these targets includes achieving net-zero emissions in scope 1 and scope 2 emissions by 2050. Additionally, Grenergy monitors its energy, water and waste consumption and reports on these metrics within its sustainability reporting.

Sustainalytics is of the opinion that the Grenergy Green Finance Framework is aligned with the Company's overall sustainability strategy and initiatives and will further the Company's actions on its key environmental priorities.

Well positioned to address common environmental and social risks associated with the projects

Sustainalytics recognizes that the net proceeds from the bonds, loans or promissory notes eventually issued under the Framework will be directed towards eligible projects that are expected to have positive environmental impact. However, Sustainalytics is also aware that such eligible projects could lead to negative environmental and social outcomes. Some key environmental and social risks associated with the eligible projects could include land use and biodiversity issues associated with large-scale renewable energy project

1. Grenergy website, About Us at:https://grenergy.eu/en/about-us/
2. Grenergy Renovables, "Sustainability Policy 2019", (2020), at:https://grenergy.eu/wp-content/uploads/2020/10/200622-Sustainability-policy.pdf
3. The GHG Protocol Corporate Standard, at:ghg-protocol-revised.pdf(ghgprotocol.org)

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development, waste generated in construction, occupational health and safety, and community relations issues.

Sustainalytics is of the opinion that Grenergy is able to manage or mitigate potential risks through implementation of the following:

• Grenergy has a Sustainability Policy in place, whereby the Company takes a preventive approach and has control mechanisms for managing the risks and impacts of its operation.8 In addition, Grenergy carries out environmental impact assessments (EIA) of its projects to analyze the environmental aspects that could be affected during all phases of each project: construction, operation, maintenance and the final dismantling phase.10 Under the EIA, the Company identifies and assesses impacts on the atmosphere, soil, water, vegetation, habitats, fauna, the historical-archaeological heritage, and the landscape.10 For each environmental aspect, the Company defines protection measures for each phase of a project, and implements measures to offset the impacts that could not be avoided.10
• In order to manage biodiversity risks, Grenergy identifies the presence of species of protected status according to the Red List of Threatened Species of the International Union for Conservation of Nature or included in respective national conservation catalogues for all of its projects.10
• To minimize waste generation, the Company monitors waste generation in its facilities and carries out a global control of generated waste, hazardous waste and recycled waste, with either material recovery or recycling.10
• Regarding worker health and safety, Grenergy has a health and safety policy which promotes the adoption of preventative measures and provides a safe and respectful work environment for employees.11 Within its Sustainability Policy, the Company ensures the safety of all workers, employees and subcontractors, through the use of specific prevention procedures.10 In Spain, for example, the Company uses an external risk prevention service to perform assessments of the working environment and establishes prevention measures, a preventive action plan and an emergency measures plan.10 In Chile, the company applies an Internal Regulation of Order, Hygiene and Safety applicable to subcontractor companies, which guarantees a safe work environment and promotes a culture of risk prevention.10 In the case of field operations, the Company prepares detailed health and safety plans for each of its projects and has personnel from the local community specialized in occupational risk prevention.10 In addition, the Company also conducts regular health and safety training for its employees and subcontractors.10
• Regarding community relation issues, the Company engages with the local community during all stages of a project, including development, construction, operation and maintenance.10 The Company has also established a feedback mechanism and grievance channels for addressing the concerns raised by local communities.10 During 2020, the Company held 189 meetings with local communities, with 341 people attending these meetings.10
• Grenergy has established principles within its Business Code of Ethics that are based on respect for labour rights, ensuring health and safety for all employees, protecting the environment and on social commitment.11 The Company also has a human rights policy in place, which incorporates international and European laws, such as the International Bill of Human Rights of the United Nations Organization, the fundamental conventions of the International Labor Organization (ILO), the ILO Declaration on Fundamental Principles and Rights at Work, and the European Convention on Human Rights.10

Based on these policies, processes and assessments, Sustainalytics is of the opinion that Grenergy has implemented adequate measures and is well positioned to manage and mitigate environmental and social risks commonly associated with the eligible categories.

Section 3: Impact of Use of Proceeds

The use of proceeds category is aligned with the four core components of the GBP and GLP. Sustainalytics has focused the below where the impact is specifically relevant in the local context.

Contribution of Renewable Energy to climate change mitigation in Europe and South America

1. Grenergy, "Sustainability Report 2020" , at:https://grenergy.eu/wp-content/uploads/2021/05/Sustainability-Report-2020-ENG.pdf
2. Grenergy, "Business Code of Ethics" , at:https://grenergy.eu/wp-content/uploads/2019/09/codigo-etica-empresarial-grenergy-renovables.pdf

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