Banca Popolare di Sondrio S p A : ENG BPSondrio DNF2023 05

TCFD REPORT 2023

TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES REPORT

Banca Popolare di Sondrio Group

ANNEX TO THE 2023 CONSOLIDATED NON-FINANCIAL STATEMENT

II

COVER PHOTO by: Samuele Tavola, Chairman's Secretariat Fellaria glacier (SO)

Banca Popolare di Sondrio SpA

Joint-Stock Company

Head Office and General Management:

16 Piazza Garibaldi, 23100 Sondrio (SO), Italy

Tel. [phone] - Fax [phone]

Websites:

www.popso.it

https://istituzionale.popso.it/en

Email: [e-mail]

Certified email address: [e-mail]

Sondrio Companies Register no. 00053810149 - Registered in the Register of Banks under no. 842

Monetary intermediation by monetary institutions other than central banks.

Parent Company of the Banca Popolare di Sondrio Banking Group -

Registered in the Register of Banking Groups under no. 5696.0

Member of the Interbank Deposit Protection Fund

Tax Code and VAT number: 00053810149

Share capital: €1,360,157,331 - Reserves: €1,385,452,113 (Figures approved by Shareholders at the General Meeting of 29 April 2023)

RATINGS

Rating issued to Banca Popolare di Sondrio by Fitch Ratings on 6 July 2023:

• Long-termIssuer Default Rating (IDR): BB+
• Short-termIssuer Default Rating (IDR): B
• Viability Rating: BB+
• Government Support Rating: ns
• Long-termDeposit Rating: BBB-
• Short-termDeposit Rating: F3
• Senior Preferred Debt: BB+
• Tier 2 Subordinated Debt: BB-
• Outlook: Stable

Rating issued to Banca Popolare di Sondrio by DBRS Morningstar on 13 November 2023:

• Long-TermIssuer Rating: BBB (low)
• Short-TermIssuer Rating: R-2 (middle)
• Intrinsic Assessment: BBB (low)
• Support Assessment: SA3
• Long-TermDeposit Rating: BBB
• Short-TermDeposit Rating: R-2 (high)
• Long-termSenior Debt: BBB (low)
• Short-termDebt: R-2 (middle)
• Subordinated Debt: BB
• Trend: Positive

Rating issued to Banca Popolare di Sondrio by Scope Ratings on 14 March 2023:

• Issuer rating: BBB
• Outlook: Stable

Rating issued to Banca Popolare di Sondrio by S&P Global Ratings on 26 February 2024:

• Stand alone credit profile:
  BBB-
• Long-TermIssuer Rating: BBB-
• Short-TermIssuer Rating: A-3
• Long-termResolution Counterparty Rating: BBB
• Short-termResolution Counterparty Rating: A-2
• Outlook: Stable

TCFD REPORT 2023

TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES REPORT

Banca Popolare di Sondrio Group

IV

Photo by: Diego Gallotta, Castel San Giovanni Office Val di Fassa (TN)

CONTENTS

01.

02.

03.

04.

05.

V

Highlights	VI
INTRODUCTION	1
−	The Group	2
− Alignment with TCFD Recommendations	4
−	TCFD Recommendations	6

GOVERNANCE	7
− Supervision of management bodies	9
− The role of Top Management	11
−	Operational coordination	12
− Ongoing training on climate-related and environmental topics	15
−	The remuneration policy	17

STRATEGY	19
−	Group's Policies	23
− BPS's 2022-2025 "Next Step" Business Plan and initiatives	25
−	Scenario analyses	32
− Medium-term projection framework evolution	33
−	Long-term planning framework	34
RISK MANAGEMENT	39

• Integration of climate-related and environmental risks into BPS's risk management

	framework	40
− Climate-related and environmental risk identification and materiality analyses	43
− Measuring and monitoring climate-related and environmental risks	65
−	Quantifying climate-related and environmental risk	91
−	Mitigation of climate-related and environmental risks	102

METRICS AND TARGETS	105
− BPS's path to target definition	106
−	GHG inventory	108
−	BPS's carbon footprint reduction targets	117

Photo by: Sandro Moretti, Factorit-IT Gavia Pass (SO)

INTRODUCTION

VII

2023

Highlights

Joining the Net-Zero	A - (Leadership) in the
Banking Alliance	CDP Score
500 €m for the 2nd	63,000 tCO2e avoided
Green Bond issued by BPS	thanks to 2,380 financing initiatives
		in the Green Bond portfolio
11	80%
	Green loans - next	non-financial corporate portfolio
		with ESG Score
98%	99% recycled paper
electricity purchased	out of total consumption
from renewable sources

Analysis of climate and environmental impacts

on the main capital and liquidity risks in different climate scenarios

Analysis of the carbon footprint

on the credit portfolio, proprietary securities and asset management

Adoption of climate- related KRIs

within the Risk Appetite Framework

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1

1. Introduction

Photo by: Fabio Ticozzi, Milan Offices Milan

INTRODUCTION2

The Group

One of first Italian cooperative banks, Banca Popolare di Sondrio (hereinafter also referred to as "the Bank" or "BPS" or "the Parent Company") has been serving the areas in which it operates since 1871. A long history, based on mutual trust and fuelled by a passion for work, a constant focus on customers and their changing needs, by strong roots that have enabled the Bank to broaden its horizons.

Over the years, BPS - also thanks to the activities carried out by other Group Companies - has extended its business operations nationwide. This, while maintaining strong ties with its geographical area of origin and its traditions, while fostering the Community's sustainable economic development through careful, tailored support for small entrepreneurs, ordinary citizens, as well as medium and large-sized enterprises. Following the approval of the corporate transformation, the Bank operates as a Joint-Stock Company, heading a banking Group with over 149,000 shareholders, more than 500 branches and over 900,000 customers.

In 2022, for the first time in the history of the Banca Popolare di Sondrio Group (hereinafter referred to as "the Group"), the 2022-2025"Next-Step" Business Plan (the "Business Plan") was presented to the public.

Updating the Business Plan was an important opportunity to consolidate the Group's ESG strategy: the integration of ESG factors into business and operations takes place through transversal and measurable objectives. These include the strengthening of governance, the implementation of Sustainability in the Bank's main processes, the review of the products and services catalogue, the participation in national and international initiatives and the continuous updating of disclosure.

In line with these goals, the Bank has started a process aimed at incorporating ESG risks into strategic mechanisms, risk management systems and key processes that characterise its business model, including credit granting and monitoring. In addition, it has integrated the consideration of Sustainability risks into its investment decision-making processes, adapting its products and services to better fit its strategy and to the changing needs of the market.

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Photo by: Marco Tonali, Milan Office 22 Valfurva (SO)

3 INTRODUCTION

Considering the central role that Sustainability has acquired over the last few years and the irrevocable commitment required from everyone, also the Group aspires to play its part, by continuing to be an important player in the transition path towards a more Sustainable economic model, while also seizing the opportunities that derive from it both on the business side and in making corporate processes more robust. To meet these ambitious goals, the Bank believes in international cooperation and in the key role of the financial sector: in December 2023, the Board of Directors approved BPS's participation in the United Nations Environment Programme Finance Initiative ("UNEP FI") and in two very important initiatives:

• Principles for Responsible Banking ("PRB");
• Net-ZeroBanking Alliance ("NZBA").

In line with the objectives defined in the Business Plan, the Bank formally supports the TCFD Recommendations, and as in the previous year, it has developed a disclosure specifically focusing on climate-related and environmental risks illustrated in this Report (the "TCFD Report").

Photo by: Sandro Moretti, Factorit-IT Lake at the Monza park (MB)