National Bank of Canada

###### Governance (cont.)\n\n Role of management\n\n ESG working group\n\nLed by the Chief Financial Officer and Executive VicePresident – Finance, the ESG working group is a multidisciplinary team that includes a number of officers from various Bank sectors. Its main duty is to develop and support the Bank's ESG strategy and initiatives. This working group is responsible for implementing the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), the United Nations Principles for Responsible Banking and the Bank's commitments in terms of climate change. Members meet monthly and, at least twice a year, the ESG working group reports to the Conduct Review and Corporate Governance Committee on advances made, as well as on ongoing and upcoming ESG projects. It also gives occasional presentations to the other committees on specific topics of interest, such as the TCFD report.\n\n###### Specialized ESG team\n\nThis team helps the ESG working group develop the Bank's environmental, social and governance strategy and ensures it is implemented in collaboration with all business sectors. The ESG team interacts with the Board and its committees, as well as with officers and executives, when reporting on progress. It also reports monthly to the ESG working group.\n\nThe ESG team maintains a constructive ongoing dialogue with all of the Bank's business lines and with external stakeholders to improve the Bank's ESG practices and related processes.

###### Governance (cont.)\n\n Role of Management\n\n ESG working group\n\nLed by the Executive Vice-President, International, the ESG working group includes a number of officers from various Bank sectors. Its main duty is to develop and support the Bank's ESG strategy and initiatives. Members meet monthly. This working group is responsible for implementing TCFD recommendations, the UN Principles for Responsible Banking and the Bank's commitments in terms of climate change, including the net-zero target for GHG emissions. At least twice a year, the ESG working group reports to the Conduct Review and Corporate Governance Committee on advances made, as well as on ongoing and upcoming ESG projects. It also gives occasional presentations to the Audit Committee and the Risk Management Committee on specific topics of interest, such as the TCFD report.\n\n###### Specialized ESG team\n\nUnder the responsibility of the Vice-President, Sustainable Development — ESG, this team helps the ESG working group develop the Bank's environmental, social and governance strategy and ensures it is implemented in collaboration with all business lines. The ESG team interacts with the Board and its committees, as well as with officers and executives, when reporting on progress. It also reports monthly to the ESG working group.\n\nThe ESG team maintains a constructive ongoing dialogue with all of the Bank's business lines and with external stakeholders to improve the Bank's ESG practices and related processes.

› NBC has established a Sustainability Bond Committee ("SBC") responsible for the ultimate review of the loans and investments that will qualify as eligible businesses and projects that fall within the Eligible Categories, to which the proceeds of a Sustainability Bond issuance will be allocated. The SBC has the ultimate decision-making authority on project selection and proceeds allocation of NBC's Sustainability Bonds.

The ESG Report is published by National Bank of Canada. Intended for all of our stakeholders, it presents our commitments and achievements in sustainable development and our key performance indicators. The Report is drawn up by the ESG team, with input from dozens of experts and collaborators. It is approved by the ESG Committee, which is made up of executives from different sectors of the organization, and revised by the Conduct Review and Corporate Governance Committee. [...] Ethics are central to all of our decisions. The Bank is committed to being transparent in all its actions and activities with respect to public policy. Our codes and policies, including the Code of Conduct, set out strict ethical standards that all employees must follow. We also take pains to comply with all applicable legislation governing the disclosure of discussions concerning public policy in all jurisdictions where we do business. Moreover, in accordance with regulatory requirements, we submit a report on our activities to the registers of lobbyists set up by the commissioners of lobbying for Quebec and Canada. [...] Led by the Chief Financial Officer and Executive Vice‑President – Finance and the Senior Vice-President – Communications, Public Affairs and ESG, the ESG Committee is made up of experts representing the Bank's different sectors and a number of executives, including several members of the Senior Leadership Team. This multidisciplinary team's main role is to establish and support the Bank's ESG strategy. The Committee also serves as an ambassador in promoting a culture that supports the Bank's ESG ambitions. Members meet monthly. Supported by a management committee, three working groups and a team entirely dedicated to ESG, the Committee oversees the implementation of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), the United Nations Principles for Responsible Banking and the Bank's commitments in terms of climate change. The ESG Committee communicates with the Senior Leadership Team as needed and the Conduct Review and Corporate Governance Committee twice a year in order to report on progress with respect to our various commitments and to follow up on our priorities under the strategic ESG plan. It also gives occasional presentations to other Board committees on topics of interest, such as climate commitments, inclusion, diversity and equity and the protection of personal information.

Responsible investment is an integral part of NBI's decisionmaking structure. At all levels of this structure, from the chairperson to the various committee members, ESG considerations are at the forefront of our approach, and we address them in innovative ways with the aim of generating tangible results. NBI's priorities, including those related to responsible investing, are adopted by NBI's executive management. Our dedicated Risk and Execution team takes responsibility for daily responsible investment actions. It leads our efforts and helps advance our responsible investment strategy. The team works with several members of the various investment teams, in addition to the over 50 portfolio management teams that are part of the NBI open architecture platform. The OP4+ evaluations, which include the integration of ESG criteria by portfolio managers, are presented to the Manager Review Committee. Responsible investment research is presented to the Portfolio Construction Committee, and working groups are occasionally formed to carry out various mandates. Lastly, the current structure is leveraged as part of our responsible investment commitments. For instance, the Performance Review Committee also monitors NBI's sustainable investing products. In addition to addressing responsible investment consistently within our structure, members of the NBI team are actively involved on various committees of the National Bank of Canada, including the ESG investment committee and working groups on ESG business opportunities and risks. This allows us to contribute more broadly to the organization's responsible investment initiatives.

The Climate Report is drawn up by the ESG and Sustainability team, with input from multiple experts and collaborators. It is approved by the ESG Committee, which is made up of executives from different sectors of the organization, and reviewed by the Board's Conduct Review and Corporate Governance Committee. [...] The Board oversees environmental, social and governance (ESG) factors, including climate risks and opportunities, in order to meet the changing needs and expectations of stakeholders. The ESG organizational structure is designed for all levels of the organization to contribute to our objectives and commitments, including Board members who, through the various committees, exercise their role of oversight over ESG factors, including climate matters. Consequently, the Bank has adopted measures enabling it to extend its commitment in this regard, notably through structured governance and the deployment of a strategy based on the ESG principles adopted by the Board in 2019. [...] The Board and certain of its committees—the Conduct Review and Corporate Governance Committee, the Risk Management Committee and the Audit Committee—have all been assigned responsibilities related to climate risks and opportunities (Table 1). They are established according to the committees' respective roles and their members' expertise. The goal is to ensure that the Bank's activities are conducted in accordance with high corporate responsibility standards. The Board and its committees are supported in their duties by the Senior Leadership Team and various internal committees, including the ESG Committee. [...] The ESG Committee is led by the Chief Financial Officer and Executive Vice-President Finance. It is composed of experts representing the different sectors of the Bank, including several members of the Senior Leadership Team, who meet monthly. Its main function is to establish and support the Bank's ESG strategy, principles and commitments, while acting as an ambassador to promote them across the organization. Supported by a management committee, three working groups and a team entirely dedicated to sustainability, the Committee oversees implementation of the recommendations of the TCFD, the United Nations Principles for Responsible Banking (PRB) and the Bank's climate commitments. The ESG Committee reports as needed to the Senior Leadership Team on progress made toward ESG priorities and commitments, and twice a year to the Board's Conduct Review and Corporate Governance Committee. An organizational structure is in place to achieve these objectives (Figure 1). In addition, ongoing constructive dialogue among various internal and external stakeholders helps advance the Bank's ESG practices. An agile and client-focused approach, in addition to the engagement of the Bank's entire workforce, enables us to maximize our impact.

The Bank's governance is achieved through the collaborative work of the Board of Directors (the "Board"), senior management and stakeholders. We believe that, by taking concerted action together with our stakeholders, we can continue to sustainably meet the changing needs of our society. At the Bank, ESG criteria and risks are considered key drivers of all our activities. The Board ensures ESG criteria are integrated into long-term strategic objectives while overseeing the progress and integration of ESG initiatives and principles. ESG responsibilities have been integrated into the mandate of the Board and all of its committees. Led by the Chief Financial Officer and Executive Vice-President – Finance, the ESG working group is a multidisciplinary team that includes a number of officers from various sectors at the Bank. Its main duty is to develop and support the Bank's environmental, social and governance strategy and initiatives. This working group is responsible for implementing the TCFD recommendations, the United Nations Principles for Responsible Banking and the Bank's commitments in terms of climate change. Members meet monthly and, at least twice a year, the ESG working group reports to the Conduct Review and Corporate Governance Committee of the Board on advances made, as well as on ongoing and upcoming ESG projects. Since November 1, 2021, the Bank's executive compensation program has been linked to the ESG priorities.

› NBC's business unit officers are responsible for identifying and assessing potential eligible projects and businesses that fall within the Eligible Categories in accordance with the criteria detailed in the Sustainability Bond Framework. The eligible projects and businesses that are selected by business lines are reviewed by the ESG Officer Sub-Committee. As part of the assessment leading to the project selection process, risks pertaining to ESG considerations and mitigators are identified, documented and reviewed. The ESG officers will screen existing and future projects and programs that align with NBC's ESG principles.

› NBC has established a Sustainability Bond Committee (SBC) responsible for the ultimate review of the loans and investments that will qualify as eligible businesses and projects that fall within the Eligible Categories, to which the proceeds of a Sustainability or Green Bond issuance will be allocated. The SBC has the ultimate decision-making authority on project selection and proceeds allocation of NBC's Sustainability Bonds.

› A sample of eligible businesses and eligible projects included in the Sustainability Bond Register is also reviewed each year to reassess their eligibility. In addition, on an annual basis, all projects and businesses are screened for controversies.

Describe the process(es) your organization has in place to ensure that your engagement activities are consistent with your overall climate change strategy[…]In line with our ESG strategy, the Bank puts in place different initiatives to reduce its negative impact on the environment, including climate-related impacts. These initiatives are consistent with the Bank's involvement in different activities that could directly or indirectly influence public policy. The Bank collaborates with various groups as a signatory of the UN PRB, to align strategies with the UN SDGs and the objectives of the Paris Agreement. In order to support the energy transition, the Bank works with peers to advance methodology and improve the quality of climate data through the PCAF. The Bank also supports the Canadian Bankers Association in the following activities: › Public consultations with the regulatory agencies for various industries › Climate scenario analysis › Integrating climate-related concepts into
risk management › Monitoring key developments and best practices › Standardizing calculation methodologies › Peer-to-peer comparison exercises.

Does your organization have a public commitment or position statement to conduct your engagement activities in line with the goals of the Paris Agreement?[…]Yes

Describe the process(es) your organization has in place to ensure that your external engagement activities are consistent with your climate commitments and/or climate transition plan?[…]In line with our ESG strategy, the Bank puts in place different initiatives to reduce its negative impact on the environment, including climate-related impacts. These initiatives are consistent with the Bank's involvement in different activities that could directly or indirectly influence public policy. The Bank collaborates with various groups as a signatory of the UN PRB, to align strategies with the UN SDGs and the objectives of the Paris Agreement. To support the energy transition, the Bank works with peers to advance methodology and improve the quality of climate data through the Partnership for Carbon Accounting Financials (PCAF),