Seche Environnement : Projet d’émission obligataire

Sustainable1

Second Party Opinion

Séché Environnement Sustainability-Linked Bond Framework

Oct. 11, 2021

Founded in 1985, Paris-based Séché Environnement provides circular-economy and waste- management solutions for industrial customers and local authorities in France as well as 14 other countries. The company recovers materials and resources, including energy, from hazardous and non-hazardous waste. In 2020, it processed over 3 million tons of waste and generated 1,000 gigawatt hours of energy. Séché Environnement also manages, treats, and recovers various types of complex waste, including asbestos, infectious medical waste, specialty gases, and PCB wastes. Additionally, the company restores polluted sites though decontamination and remediation, dismantling and deconstruction of operations, and management of pyrotechnic waste. Séché Environnement also offers residual waste treatment and environmental emergencies response services.

In our view, Séché Environnement's Sustainability Linked Bond Framework, published Oct. 11, 2021, is aligned with:

• Sustainability-LinkedBond Principles, ICMA, 2020

Issuer's Sustainability Objectives

PRIMARY ANALYST

María Ortiz de Mendívil

Madrid

[phone]

maria.omendivil

@spglobal.com

SECONDARY ANALYST

Ana Maria RomeroRamirez

Paris

[phone]

ana.maria.r

@spglobal.com

RESEARCH CONTRIBUTOR

Debadrita Mukherjee

CRISIL Global Analytical Center, an S&P affiliate, Mumbai

Séché Environnement's business activities are intrinsically linked to the low-carbon, circular economy. It aims to provide waste-management solutions that preserve natural resources and protect the environment by recovering and reusing recyclable materials from waste and by using waste to generate energy. Furthermore, the company is committed to reducing its greenhouse gas emissions (GHGs) as well as those of its clients.

To this end, the company has developed a Sustainability-Linked Bond Framework to aid in aligning its value proposition with its funding strategy.

Selected Key Performance Indicators (KPIs) And Sustainability Performance Targets (SPTs)
KPI	SPT	Baseline	2020 Performance
Absolute GHG emissions	Reduce GHG emissions (Scope 1 and 2) in France by 8% by	594,000 tCO2e	594,000 tCO2e
reduction in France	2024, or 10% by 2025 (from 2020 baseline at a constant
(Scope 1 and 2 in metric	perimeter)
tons of CO2 equivalent
[tCO2e] at a constant
perimeter)
GHG emissions the	Increase GHG emissions avoided that the company's	259,700 tCO2e	259,700 tCO2e
company's recycling	recycling activities in France contribute to, by 30% by	avoided	avoided
activities in France	2024, or 40% by 2025 (from 2020 baseline at a constant
contribute to avoiding (in	perimeter).
tCO2e at a constant
perimeter)
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		Sustainability-Linked Bond
			Framework

Second Party Opinion

Second Party Opinion Summary

Selection of key performance indicators (KPIs)

Alignment

KPI 1

KPI 2

• Séché Environnement's Sustainability-Linked Bond Framework is aligned with this component of the Sustainability-Linked Bond Principles.

Absolute GHG emissions reduction in France	Not aligned	Satisfactory	Strong	Advanced
(Scope 1 and 2 in tCO2e at a constant
perimeter)
GHG emissions the company's recycling
Not aligned	Satisfactory	Strong	Advanced
activities in France contribute to avoiding (in
tCO2e at a constant perimeter)

Calibration of sustainability performance targets (SPTs)

Alignment

SPT 1

SPT 2

• Séché Environnement's Sustainability-Linked Bond Framework is aligned with this component of the Sustainability-Linked Bond Principles.

Reduce GHG emissions in France (Scope 1 and	Not aligned	Satisfactory	Strong	Advanced
2) by 8% by 2024, or 10% by 2025 (from 2020
baseline at a constant perimeter)
Increase GHG emissions avoided that the
Not aligned	Satisfactory	Strong	Advanced
company's recycling activities in France

contribute to by 30% by 2024, or 40% by 2025 (from 2020 baseline at a constant perimeter).

Instrument characteristics

Alignment	✔	Séché Environnement's Sustainability-Linked Bond Framework is aligned with this component of the
		Sustainability-Linked Bond Principles.

Instruments under the framework will be subject to a coupon step-up or a premium payment by Séché Environnement if one or more of the selected KPIs have not achieved the SPT on the target observation date or if verification of the company's performance against the SPT has not been made public.

The type of margin applicable will be specified within the final terms of the relevant sustainability-linked bond. The issuer does not, however, include in this framework information concerning a fallback mechanism in the case the performance against the SPT for each KPI cannot be calculated or observed in a satisfactory manner.

Reporting

Alignment

Score

• Séché Environnement's Sustainability-Linked Bond Framework is aligned with this component of the Sustainability-Linked Bond Principles.

Not aligned	Satisfactory	Strong	Advanced

Séché Environnement will publish and update on an annual basis a Sustainability-Linked Bond Progress Report on its website. This report will include up-to-date information on the selected KPIs and SPTs and relevant information to enable investors to monitor its progress against these targets.

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Second Party Opinion

Furthermore, the report will include, when feasible, a qualitative or quantitative explanation of the contribution of the main factors behind the evolution of each selected KPI; an illustration of the positive sustainability impact of the performance improvement; and any reassessments of KPIs due to changes in the calculation method or adjustments to their baselines or scope.

Post-issuance review

Alignment	✔	Séché Environnement's Sustainability-Linked Bond Framework is aligned with this component of the
		Sustainability-Linked Bond Principles.

Séché Environnement is committed to having its performance against each KPI verified annually by a qualified external auditor at "Limited Assurance" standard, as required by the Sustainability-Linked Bond Principles.

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Second Party Opinion

Framework Assessment

Selection of key performance indicators (KPIs)

The Principles make optional recommendations for stronger structuring practices, which inform our relevancy opinion as satisfactory, strong, or advanced. For each KPI, we consider how relevant the KPI is for sustainability by exploring the clarity and characteristics of the defined KPI; its significance for the issuer's sustainability disclosures; and how material it is to the issuer's industry and strategy.

• Séché Environnement's Sustainability-Linked Bond Framework is aligned with this component of the Sustainability-Linked Bond Principles.

KPI 1	Absolute GHG emissions reduction in France	Not aligned	Satisfactory	Strong	Advanced
	(Scope 1 and 2 in tCO2e at a constant
	perimeter)

We believe the first KPI selected by Séché Environnement is strong, considering the scope, objective, and calculation are clearly articulated, and that the KPI responds to a highly material topic for the sector that is integrated into the company's sustainability strategy.

The KPI's objective, baseline, and applicable scope are clearly stated in the framework (to reduce its Scope 1 and 2 emissions--excluding biogenic emissions, which the company considers neutral- -in France as compared with 2020). Given that Séché Environnement's Scope 1 and 2 emissions in France represented 83% of the company's total GHG emissions in 2020, we believe the scope is relevant for its environmental efforts.

Séché Environnement publishes on an annual basis a GHG emissions report, as required by national regulation. The method used to calculate Scope 1 and 2 emissions is aligned with the GHG Protocol Corporate Standard and supported by the Bilan Carbone® V8 initiative, which allows for external comparison. Furthermore, GHG emission reduction is linked to the execution of Séché Environnement's sustainable strategy, which consists of four core building blocks: (i) technological innovation, given that the company will invest in new technology to achieve its environmental objectives; (ii) economic performance, since its environmental footprint is linked to its financial results; and (iii) social and (iv) societal performance, given that the company must maintain its social license to operate, that is uphold solid relationships with its employees, stakeholders, and the general public.

According to the Global Waste Management Outlook, about 7 billion-10 billion metric tons of waste are generated globally each year. Waste-treatment processes are a vast contributor of GHG emissions representing over 3% of the global GHG in 2020, according to Global Change Data Lab. Therefore, we believe the KPI is also relevant and material to the sector.

KPI 2	GHG emissions the company's recycling	Not aligned	Satisfactory	Strong	Advanced
	activities in France contribute to avoiding (in
	tCO2e at a constant perimeter)

We believe the second KPI included in the framework is strong as the scope, objective, and calculation are clearly articulated. We consider the provision of more environmentally sustainable products that aid third parties in reducing the release of GHG emissions contributes to the transition to a circular economy, which is relevant to the industry and the company's sustainability strategy.

The KPI aims to increase GHG emissions that the company contributes to avoiding (compared to 2020) as a result of its bromine and solvent, recycling in France. The French Environment and Energy Management Agency (ADEME) considers avoided emissions to be the emissions prevented when users opt for solutions or products than have a lower impact than traditional solutions or practices. The use of recycled materials (solvents and bromine) is a significant contributor to total avoided emissions--64% of total avoided emissions by the company. The remaining 36% relate to energy production from heat. Séché Environnement has left out of scope emissions avoided coming from its waste-to-energy business, which we see as a strength of the KPI considering this

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Second Party Opinion

activity is not included as of today within the EU Taxonomy for sustainable activities. Furthermore, the method used in the framework allows for external comparison.

In line with the Circular Economy Action Plan adopted by the European Commission, which is applicable to Europe's waste-management sector, the company's sustainability strategy aims to contribute to the transition to a circular and low-carbon economy, which we believe is enabled, partly by providing third parties with products and solutions that help limit their carbon footprint.

Calibration of sustainability performance targets (SPTs)

The Principles make optional recommendations for stronger structuring practices, which inform our ambition opinion as satisfactory, strong, or advanced. We consider the level of ambition for each target by assessing its clarity and characteristics, how the issuer defines the target with reference either to its past performance, or to external or competitor benchmarks, and how it explains what factors could influence future performance.

• Séché Environnement's Sustainability-Linked Bond Framework is aligned with this component of the Sustainability-Linked Bond Principles.

SPT 1 Reduce GHG emissions (Scope 1 and 2) in	Not aligned	Satisfactory	Strong	Advanced
France by 8% by 2024, or 10% by 2025 (from
2020 baseline at a constant perimeter)

We believe the ambition, clarity, and characteristics of the SPT selected for the first KPI of the framework are strong. Furthermore, the framework briefly describes the strategy to reach the target and provides externally verified information on Séché Environnement's past performance.

The baseline and historical performance have been externally verified and are part of the company's regular public sustainability reporting. The framework outlines the timeline for target achievement (expressed in absolute values), the expected observation date in 2024 or 2025, depending on the bond tenor, and the relevant trigger events.

The SPT is benchmarked against the company's past performance, which shows that its Scope 1 and 2 fossil GHG emissions in France have been on an ascending trajectory since 2017. Accordingly, the SPT displays an improvement in sustainability performance above that previously achieved by the company.

The SPT selected supports the company's overarching objective to reduce absolute Scope 1 and 2 emissions globally by 25% by 2030 (from 2020 baseline, at a constant perimeter), which is in line with targets set by sector peers in France. Séché Environnement has engaged an external party with environmental expertise to support its target setting and used the Science-Based Target Initiative method to define its 2030 target, with the aim to validate it with the initiative.

The framework mentions factors that will support achievement of the target, including reducing GHG emissions from incineration activities and improving methane capture on landfill. Additionally, Séché Environnement comments on external factors beyond its control that may put the achievement of the targets at risk, such as increasing the overall waste sent to landfill.

Baseline

2020

594,000 tCO2e

Reduce GHG emissions in France (Scope 1 and 2) by 8% by 2024, or 10% by 2025 (from 2020 baseline at a constant perimeter)

2024	2025
546,480 tCO2e	534,600 tCO2e
Equivalent to 8% reduction	Equivalent to 10% reduction

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