SPO Pikolin

March 2021

SECOND PARTY OPINION On the sustainability of Grupo Pikolin’s Sustainability-Linked Financing Framework V.E is of the opinion that Grupo Pikolin’s Sustainability-Linked Financing Framework is aligned with the core components of the Sustainability-Linked Bond Principles (SLBP) 2020.

Framework Weak

Limited

Robust

Characteristics of the Framework

Advanced

KPI's Relevance

Target's Ambition

Audit of the Data

Yes

Three-year Historical Data

No

Nature of the Impacts on the Financial Instruments’ Characteristics

SDG Mapping

Financial and/or structural

Disclosure of measures to achieve the SPT’s

Yes

Sustainability Performance Target (SPT) KPI : Percentage of Green Energy in operations - SPT 1 : Increase of Green energy in operations to 19% by 2020 - SPT 2 : Increase of Green energy in operations to 21% by 2021 - SPT 3: Increase of Green energy in operations to 24% by 2022 - SPT 4: Increase of Green energy in operations to 27% by 2023 - SPT 5: Increase of Green energy in operations to 28.5% by 2024 - SPT 6: Increase of Green energy in operations to 30% by 2025 All SPT’s have 2019 (18%) as baseline.

KPI

2019

SPT1

SPT2

SPT3

SPT4

(Baseline)

2020*

2021

2022

18%

19%

21%

24%

+

+

SPT5

SPT6

2023*

2024

2025*+

27%

28.5%

+

*Trigger events: Promissory notes 2020, Bonds 2023 and 2025.

+ SPT 2, 3, 4, 5 & 6 have been set by the Issuer for future potential emissions on any Sustainability Financial Instrument, based on the expected target towards the 2025 SPT.

Issuer Controversies

Controversial Activities As of March 2021, the Issuer appears not to be involved in one of the 17 controversial activities screened under our methodology:

Number of controversies

None

☐ Animal welfare

☐ Fossil Fuels industry ☐ High interest rate lending ☐ Pornography

☐ Cannabis

☐ Coal

☐ Human Embryonic Stem ☐ Reproductive medicine Cells

Frequency

NA

☐ Chemicals of concern

☐ Gambling

☐ Military

Severity

NA

Responsiveness

NA

☐ Civilian firearms

☐ Genetic engineering ☐ Nuclear power

+

☐ Tar sands and oil shale ☐ Tobacco

☐ Alcohol

1

30%

March 2021

Keys findings V.E is of the opinion that Grupo Pikolin’s Sustainability-Linked Financing Framework (the last updated version was provided to V.E on March 15th, 2021) is aligned with the core components of the Sustainability-Linked Bond Principles (SLBP) 2020.

Selection of Key Performance Indicators (KPIs) –aligned with SLBP. •

The KPI is relevant and material from an environmental standpoint

•

The KPI is measurable and externally verifiable

•

The KPI’s definition, coverage and underlying methodologies are clearly defined and disclosed there is a clear commitment of the issuer to inform the relevant stakeholders of any changes in the methodology.

Calibration of Sustainability Performance Targets (SPTs) –aligned with SLBP • •

The SPTs demonstrate a limited level of ambition The timeline, baseline and trigger event are clearly disclosed

•

The means to achieve the SPTs are disclosed and credible

Sustainability Financial Instruments Characteristics – aligned with SLBP •

The nature of the Sustainability Financial Instruments characteristics’ variation is clearly disclosed.

•

The issuer commits that the actual financial and/or structural impact(s) will be clearly disclosed in the Sustainability Financial Instruments’ legal documentation for each issuance.

Reporting–aligned with SLBP and best practices identified by V.E •

The internal control and reporting processes are relevant, transparent and support the provision of reliable data

•

The Issuer commits to annual reporting on all relevant information related to the KPI and its associated SPT, including results, underlying methodologies, and assumptions

Verification–aligned with SLBP and best practices identified by V.E •

The KPI will be externally verified on an annual basis

•

The achievement of the SPTs will be externally verified on an annual basis until the last observation date and the verification assurance reports will be made publicly available

Scope of External Reviews ☒

Pre-issuance Second Party Opinion

☒

Independent verification of SPT(s) achievement

☒

Independent verification of KPI(s) reported data

Contact Sustainable Finance Team | VEsustainablefinance@vigeo-eiris.com

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March 2021

SCOPE V.E was commissioned to provide an independent opinion (thereafter “Second Party Opinion” or “SPO”) on the integration of one environmental factor to the Sustainability-Linked Financial Instruments1 (the “Instruments”) issued by Grupo Pikolin (the “Issuer”) in compliance with the Sustainability-Linked Financing Framework (the “Framework”) created to govern their issuances, the last updated version of the Framework was provided to V.E on March 15th, 2021. The Framework aims to highlight both the Issuer’s sustainability strategy and sustainable finance strategy while demonstrating its alignment with the ICMA’s Sustainability-Linked Bond Principles. In addition, the Framework includes the Issuer’s commitment to achieve a specific targets (“Sustainability Performance Target” or “SPT”) regarding one environmental key performance indicator (hereafter the “KPI”) proposed as part of its sustainability strategy. As opposed to other sustainable financial instruments such as green bonds or other types of green loans, the objective is not to finance sustainable projects or investments. Indeed, such facilities are agnostic on how funds are used. The main feature of this type of financing is the variation of the bond/loan’s financial and/or structural characteristics, depending on whether the Issuer achieves predefined sustainability performance objectives. The selected KPI will be linked to the variation of the Instruments' financial characteristics as the following: KPI 1: Percentage of Green Energy in operations, with the following targets:

-

-

SPT 1*: Increase of Green energy in operations to 19% by 2020, baseline 2019 (18%).

-

SPT 2+: Increase of Green energy in operations to 21% by 2021, baseline 2019 (18%).

-

SPT 3+: Increase of Green energy in operations to 24% by 2022, baseline 2019 (18%)

-

SPT 4*+: Increase of Green energy in operations to 27% by 2023, baseline 2019 (18%).

-

SPT 5+: Increase of Green energy in operations to 28.5% by 2024, baseline 2019 (18%)

-

SPT 6*+: Increase of Green energy in operations to 30% by 2025, baseline 2019 (18%).

* The trigger events are: Promissory notes 2020 and for Bonds 2023 and 2025. + SPT 2, 3, 4, 5 & 6 have been set by the Issuer for future potential emissions on any Sustainability Financial Instrument, based on the expected target towards the 2025 SPT.

Our opinion is established using V.E Environmental, Social and Governance (“ESG”) assessment methodology and the International Capital Market Association’s (ICMA) Sustainability-Linked Bond Principles (“SLBP”), voluntary guidelines, published in June 2020. This opinion is strictly limited to the integration of one environmental factor in the Instruments.

This opinion does not cover the integration of broader sustainability factors (i.e. social and governance), or the labelling of the Instruments where the final decision is left to Grupo Pikolin. This opinion does not constitute a verification or certification.

Our opinion is built on the review of the following components: 1.

Framework: we assessed the Framework's alignment with the core components of the SLBP 2020.

2.

Issuer: we assessed the Issuer’s management of potential stakeholder related ESG controversies and its involvement in controversial activities2.

Our sources of information are multi-channel, combining data from (i) public information gathered from public sources, press content providers and stakeholders, (ii) information from V.E exclusive ESG rating database, and (iii) information provided by the Issuer through documents.

We carried out our due diligence assessment from March 10th to March 18th, 2021. We consider that we were provided with access to all the appropriate documents we solicited. We consider that the information made available enables us to establish our opinion with a reasonable level of assurance on its completeness, precision, and reliability.

1 2

The Issuer reports that issuances will include bonds, obligations, commercial papers and promissory notes.

The 17 controversial activities screened by V.E are: Alcohol, Animal welfare, Cannabis, Chemicals of concern, Civilian firearms, Fossil Fuels industry, Coal, Gambling, Genetic engineering, High interest rate lending, Human Embryonic Stem Cells, Military, Nuclear power, Pornography, Reproductive medicine, Tar sands and oil shale, and Tobacco.

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March 2021

FRAMEWORK The Issuer has described the main characteristics of the Instruments within a formalised Framework which covers the core components of the SLBP 2020 (the last updated version was provided to V.E on March 15th, 2021). The Issuer has committed to make this document publicly accessible on its website3 at the first issuance date, in line with good market practices.

Alignment with Sustainability-Linked Bond Principles Selection of the Key Performance Indicator (KPI)

Not Aligned

Partially Aligned

Aligned

Best Practices

COHERENCE V.E considers that the KPI selected is coherent with Grupo Pikolin’s strategy and priorities in terms of sustainability.

Grupo Pikolin established a dedicated Sustainable Environmental and Energy Committee that monitors, coordinates and controls the Issuer’s environmental and energy performance, including energy consumption and other resources natural such as: water, natural gas, cardboard or wood, among others-, as well as noise emissions to the outside or water discharges of the facilities.

Grupo Pikolin has formalized a sustainability strategy through a Sustainability Memoire4 published since 2017 in which the company has announced a new target to align its circular economy strategy by reducing CO2 emissions. As of 2019, the company reports that it has avoided 2.6 tons of CO2eq on the use of thermo solar energy. Grupo Pikolin reports on the Framework targets regarding the increase of Green energy use in operations: 19% by 2020, 21% by 2021, 24% by 2022, 27% by 2023, 28.5% by 2024, and 30% by 2025.

Moreover, Grupo Pikolin reports to have integrated sustainability into its business activities, and focused efforts on responsible management of raw materials such as carton, plastic, and wood. In addition, Grupo Pikolin has achieved ISO 14001 and ISO 50001 certifications. Additionally, the Issuer reports on a new Eco-designed mattress line called “Eco-pik” which CO2eq emissions varies from 120,000kg CO2 eq to 80,000kg CO2 eq compared to a non eco- designed product, according to their reports. However, the Issuer does not publicly disclose quantitative long-term environmental targets after the year 2025.

3 4

Pikolin’s website: https://www.pikolin.com/es - accessed 17/03/2021 https://www.pikolin.com/es/responsabilidad-social-corporativa-pikolin

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March 2021

SDG Matrix The selected KPI is likely to contribute to two of the United Nations’ Sustainable Development Goals (“SDGs”), namely: Goal 7. Affordable and Clean energy and Goal 13. Climate Action.

KPI

SDG

SDG TARGETS

7.2 By 2030, increase substantially the share of renewable energy in the global energy mix.

PERCENTAGE OF GREEN ENERGY IN OPERATIONS

7.3 By 2030, double the global rate of improvement in energy efficiency

13.1 Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries

KPI: PERCENTAGE OF GREEN ENERGY IN OPERATIONS

MATERIALITY V.E considers that the selected KPI reflects one of the Issuer’s most material sustainability issues as well as one of the most material challenges for its sector.

Minimizing environmental impacts from energy use is among the major environmental issues for the Mattresses Industry given that carbon emissions from the industry come from fossil fuels and plastics in the mattresses themselves.

The production processes and transportation are also responsible for emissions. Indeed, a lot of energy goes into creating mattresses, which means carbon emissions from factories and plants, plus the air miles and vehicular miles in the transportation of materials and goods. For many foam and traditional mattresses the sourcing of materials also has environmental impacts. The foam often comes from a man-made source, such as polyurethane or even petroleum.

As of today, plastic and fossil fuels are two of the biggest foes of the eco-warrior. Moreover, the Mattresses Industry can emit VOCs (volatile organic compounds). These fumes contaminate the local atmosphere in the bedroom, which is a health concern to occupants.

Therefore, one of the major concerns for the industry is greenhouse gas emissions and their impact on climate change. Thus, although the Mattresses Sector can play an important role in local and global economic development, the industry faces the challenge of meeting local production while reducing its environmental impacts, notably using Green energy in its operations and processes. In 2019, the company reported to started using the SIMATIC Energy Manager Pro system, which allows the integration of all the equipment to monitor and control all procedures. As a result, Grupo Pikolin reported to have achieved significant reductions in energy consumption in all its facilities. Its total electricity consumption was reduced by 14% and 40% consumption of natural gas in the production area. Of note, Grupo Pikolin disclosed that it has achieved an increase of 30% in its production capacity.

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March 2021

MEASURABILITY AND VERIFICATION The selected KPI is externally verifiable and measurable on a consistent methodological basis. The Issuer reports that the KPI has historical been externally verified KPI values covering the previous 2 years.

The Issuer commits to review the Framework and to inform relevant stakeholders in case of material changes, including the KPI's coverage, calculation methodology, and the SPT's calibration.

CLARITY The definition, perimeter, and underlying methodologies for the selected KPIs are clearly defined in internal documentation.

The Issuer has provided the following calculation formula on the total percentage of Green Energy used which includes high performance cogeneration: -

Equivalent kWh of Renewable Electricity

-

Equivalent kWh Photovoltaic Energy

-

Equivalent kWh Thermo Solar Energy

-

Equivalent m3 Water usage

The selected KPI perimeter and methodology is based on the ISO 5001 certification and the Global Initiative Standards (GRI). The KPI’s definition rely on external references. The rationale and process for the selection of the KPI is considered relevant. The selection of the KPI is relevant within the context of Grupo Pikolin’s environmental strategy regarding Green energy consumption exercised in 2018 when it conducted the ISO 5001 certification and in 2019 with changes on its production line regarding eco-designed and technological advances.

EXHAUSTIVENESS The Issuer reports the selected KPI covers Grupo Pikolin’s biggest production site which represented 50% of total revenues by 2019. The Issuer reports that the coverage of the KPI will not be subject to modifications.

BEST PRACTICES  The KPI is measurable or quantifiable on a consistent methodological basis and the Issuer commits to review the Framework in case of material changes, including the KPI's coverage, calculation methodology, and the SPT's calibration.  The rationale and process for the KPI selected is clearly disclosed in the Framework. The last updated version of the Framework was provided to V.E on March 15th, 2021.  The KPI was previously disclosed and externally verified KPI values covering at least the previous 2 years.

6

March 2021

Calibration of the Sustainability Performance Target (SPT 1 - SPT 2 - SPT 3 - SPT 4 - SPT 5 - SPT 6)

Partially Aligned

Not Aligned

Best Practices

Aligned

AMBITION KPI: PERCENTAGE OF GREEN ENERGY IN OPERATIONS By using the absolute value of percentage of Green Energy per year, the data set should fairly show positive or negative KPI trends, reflecting the Issuer’s commitment to fight climate change, thus enabling investors to make an appropriate assessment of the overall environmental performance.

Table 1 – Percentage of Green energy in operations (%) FORECAST

REPORTED DATA

OBJECTIVES

2018

2019 (Baseline)

2020*

2021+

2022+

2023*+

2024+

2025*+

17.49%

18%

19%

21%

24%

27%

28.5%

30%

+1%

+ 2%

+3%

+3 %

+1.5%

+ 1.5 %

Expected Annual total variation (%)

5.6%

10.5%

14.3%

12.5%

5.6%

5.3%

Expected total variation compared to baseline (2019) (%)

5.6%

16.6%

33.3%

50%

58.5%

66.6%

KPI

Annual increase (%)

+ 0.51 %

* The trigger events are: Promissory notes 2020 and for Bonds 2023 and 2025. + SPT 2, 3, 4, 5 & 6 have been set by the Issuer for future potential emissions on any Sustainability Financial Instrument, based on the expected target towards the 2025 SPT.

Based on several points of comparison, we consider that Grupo Pikolin’s target shows a limited5 level of ambition.

According to the expected SPT 1, Grupo Pikolin’s share of Green energy in operations will reach a 19% in 2020 compared to 2019 (18%), which represents an improvement compared to PIKOLIN's Business as Usual (+5.6%). The expected SPT 2 (21% by 2021) compared to 2019 (18%) represents a material improvement compared to PIKOLIN's Business as Usual (+16.6%). The expected SPT 3 (24% by 2022) compared to 2019 (18%) represents a material improvement compared to PIKOLIN's Business as Usual (+33.3%). The expected SPT 4 (27% by 2023) compared to 2019 (18%) represents a material improvement compared to PIKOLIN's Business as Usual (+50%). The expected SPT 5 (28.5% by 2024) compared to 2019 (18%) represents a material improvement compared to PIKOLIN's Business as Usual 5

VE scale of assessment: Weak / Limited / Robust / Advanced

7

March 2021

(+58.5%). In addition, SPT 6 (30% by 2025), represent a material improvement (+66.6%) compared to Grupo Pikolin’s share of Green energy in operations in 2019 respectively. However, the Issuer does not publicly disclose quantitative long-term environmental targets after 2025, in line with any national or international renewable energy initiatives such as RE1006.

The RE100 is a global initiative in partnership with the Carbon Disclosure Project7 (CDP) to accelerate change towards zero carbon grids at scale, especially on renewable electricity. In January 2017, the RE100 initiative disclosed a report called the “RE100 Joining Criteria8” in which the minimum requirements of renewable energy criteria are mentioned, based on a renewable power strategy from corporate members that includes credible deadlines for achieving, that are: -

Achieve 100% of Renewable Electricity by 2050, with interim steps of at least: o

Achieve 60% of Renewable Electricity by 2030

o

Achieve 90% of Renewable Electricity by 2040

PIKOLIN reports that the growth of Green energy from 2018 to 2025 represents approximately 2% increase per year, reaching the following intermediary targets: 19% by 2020, 21% by 2021, 24% by 2022, 27% by 2023, 28.5% by 2024, and 30% by 2030. However, according to VE projections, an approximately 2% increase per year will only allow PIKOLIN to reach a 40% of Green energy by 2030, which represents a difference of (-20%) compared to the RE100 criteria of 60% of Renewable Electricity by 2030.

MEASURES TO ACHIEVE THE SPT The means for achievement of the SPT are credible and disclosed in internal documentation. The Issuer reports that the SPT will be achieved through one main measure: -

Increase Green electricity acquired by the Spanish company named ENDESA (Empresa Nacional de Electricidad Sociedad Anónima) with which Grupo Pikolin has signed a commercial contract.

Additionally, PIKOLIN disclosed any key factors beyond the Issuer’s direct control that may affect the achievement of the SPT(s) or strategic information what would decisively impact the achievement of the SPT(s).

https://www.there100.org/ https://www.cdp.net/en 8 https://www.there100.org/sites/re100/files/2020-10/RE100%20Joining%20Criteria.pdf 6 7

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March 2021

Sustainability Financial Instruments Characteristics

Not Aligned

Partially Aligned

Aligned

Best Practices*

The nature of the Instruments characteristics’ variation and the trigger event are clearly disclosed in the Framework.

The communicated trigger event is the following: 1.

SPT 1*: Increase of Green energy in operations to 19% by 2020, baseline 2019 (18%).

2.

3.

4.

5.

6.

SPT SPT SPT SPT SPT

2+: Increase of Green energy in operations to 21% by 2021, baseline 2019 (18%).

3+: Increase of Green energy in operations to 24% by 2022, baseline 2019 (18%) 4*+: Increase of Green energy in operations to 27% by 2023, baseline 2019 (18%).

5+: Increase of Green energy in operations to 28.5% by 2024, baseline 2019 (18%) 6*+: Increase of Green energy in operations to 30% by 2025, baseline 2019 (18%).

* The trigger events are: Promissory notes 2020 and for Bonds 2023 and 2025. + SPT 2, 3, 4, 5 & 6 have been set by the Issuer for future potential emissions on any Sustainability Financial Instrument, based on the expected target towards the 2025 SPT.

If the SPT is not met at the observation date, which is considered as the last year available data prior to the maturity of the bonds or obligations (i.e. 2020, 2021, 2022, 2023, 2024, 2025), the Issuer will increase the coupon of the bonds or obligations (one annual payment). Promissory Notes or Commercial Papers will have a financial and/or structural impact(s)9 in case the SPT is not met at the observation date10. The Issuer commits that the actual financial and/or structural impact(s) will be clearly disclosed in the legal documentation for each issuance in the case of bonds and in the brochure of the promissory notes program for promissory notes.

On the bond’s characteristics, Grupo Pikolin reports on the possibility that the Bonds could be callable. Due to this financial characteristic, PIKOLIN could exercise the call option if the SPT will be achieved or exceeded. If this applies, the financial characteristics of the Callable-Bonds and compensation to investors will be reported in the Financial Term Documentation. Additionally, if the Issuer call/redeem the Bonds anyway without meeting the SPT disclosed in the last Annual Report, the Issuer will report on triggering a coupon step up, whose magnitude adjustment will be defined on due time. *V.E considers that, as of today, there is insufficient information and precedents in the market to appropriately assess the potential best practices regarding the instrument’s characteristics variation. In this sense, the "Aligned" level is currently considered to be the highest level to be achieved by Issuers on this pillar.

The Issuer states in the Framework that “financial and/or structutal impacts” may be considered if expected to entail a significant future improvement in the Group's sustainable field and in the KPI. 10 In the case of promissory notes program, the observation date will refer to the expiration date of the program and not the expiration date of the promissory notes issued under the program.

9

9

March 2021

Reporting Not Aligned

Partially Aligned

Aligned

Best Practices

KPI: PERCENTAGE OF GREEN ENERGY IN OPERATIONS REPORTING The Issuer commits to report on the KPI on an annual basis until the Instruments’ maturity and in case of material changes in the coverage, methodology, the KPIs or the SPTs' calibration.

Grupo Pikolin has been monitoring on the KPI’s underlying data and reporting on the selected KPI since 2018.

Calculations methodologies have not evolved.

CONTROL The selected KPI is internally verified through the Issuer’s operational processes.

In addition, Grupo Pikolin’s share of Green energy data is externally verified in the context of the ISO 50001 certification and AENOR (Asociación Española de Normalización y Certificación)11.

ACCESIBILITY OF RESULTS The reporting will include, at least, the results, the underlying assumptions and calculation methodologies and any other relevant information to enable progress on the SPTs. In addition, the Issuer commits to review the Framework on a regular basis, in case of updated version the SLB’s and/or ICMA’s Principles, or in case of any other material changes.

BEST PRACTICES 

11

The reporting will be published annually and in case of material changes in the coverage, methodology, the KPIs or the SPTs' calibration

https://www.aenor.com/

10

March 2021

Verification Not Aligned

Partially Aligned

Aligned

Best Practices

The performance level against the SPT will be externally reviewed on an annual basis, until the last observation date (i.e. 2020, 2021, 2022, 2023, 2024,2025) and in any case for any date/period relevant for assessing the SPT’s performance leading to a potential adjustment of the instruments’ financial characteristics.

The verification assurance reports will be made publicly available within Grupo Pikolin’s Social Responsibility Reports (RSC) disclosed on its website.

BEST PRACTICES 

The external verification of the performance level against the SPT will be conducted on an annual basis until the last observation date.

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March 2021

ISSUER Management of ESG Controversies As of March 2021, the review conducted by V.E did not reveal any ESG controversy faced by Grupo Pikolin over the last four years.

Involvement in Controversial Activities As of March 2021, Grupo Pikolin appears not to be involved in any of the other 17 controversial activities screened under our methodology, namely: Animal welfare, Cannabis, Chemicals of concern, Civilian firearms, Coal, Fossil Fuels industry, Unconventional oil and gas, Gambling, Human embryonic stem cells, High interest rate lending, Genetic Engineering, Military, Nuclear Power, Pornography and Reproductive Medicine.

The controversial activities research provides screening of companies to identify involvement in business activities that are subject to philosophical or moral beliefs. The information does not suggest any approval or disapproval on their content from V.E.

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March 2021

METHODOLOGY In V.E’ view, Environmental, Social and Governance (ESG) factors are intertwined and complementary. As such they cannot be separated in the assessment of ESG management in any organisation, activity, or transaction. In this sense, V.E provides an opinion on the Issuer’s ESG performance as an organisation, and on the processes and commitments applicable to the intended issuance.

Our Second Party Opinions (SPOs) are subject to internal quality control at three levels (Analyst, Project Manager and Quality Reviewer).

If necessary, this process is complemented by a final review and validation by the Expertise Committee and Supervisor. A right of complaint and recourse is guaranteed to all companies under our review, following three levels: first, the team in contact with the Issuer; then the Executive Director in charge of Methods, Innovation & Quality; and finally, V.E’ Scientific Council. All employees are signatories of V.E’ Code of Conduct, and all consultants have also signed its add-on covering financial rules of confidentiality.

ISSUANCE Alignment with the Sustainability-Linked Bond Principles S c a l e o f a s s e s s m e n t : N o t a l i g n e d , P a r t i a l l y a l i g n e d , Al i g n e d , B e s t P r a c t i c e s The Framework has been evaluated by V.E according to the LMA’s Sustainability-Linked Loan Principles – May 2020 (“SLLP”) and the ICMA’s Sustainability-Linked Bond Principles - June 2020 (“SLBP”) and on our methodology based on international standards and sector guidelines applicable in terms of ESG management and assessment.

Selection of Key Performance Indicators (KPIs) KPI’s materiality and coherence with the Issuer overall sustainability strategy, KPI’s measurability and clarity, internal and external control over the KPI’s data, exhaustiveness of the perimeter.

Calibration of Sustainability Performance Targets (SPTs) Coherence of the SPTs with the overall sustainability strategy, ambition of the SPTs (compared the Issuer’s own performance, sector peers and relevant international standards), trigger events’ disclosure, means credibility (including scope and geographical coverage of the means).

Sustainability Financial Instruments characteristics Disclosure of the bond characteristics’ variation, meaningfulness of these variation.

Reporting Reporting process formalisation and verification, data’s accessibility.

Verification Verification of the performance against the SPTs.

ISSUER Issuer’s ESG performance Scale of assessment of E SG performance: Weak, Limited, Robust, Advanced NB: The Issuer’s level of ESG performance (i.e. commitments, processes, results of the Issuer related to ESG issues), has been assessed through a complete process of rating and benchmarking developed by V.E. The Issuers ESG performance has been assessed by V.E on the basis of its: -

Leadership: relevance of the commitments (content, visibility and ownership).

-

Implementation: coherence of the implementation (process, means, control/reporting).

-

Results: indicators, stakeholders’ feedbacks and controversies.

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March 2021

Management of stakeholder-related ESG controversies A controversy is an information, a flow of information, or a contradictory opinion that is public, documented and traceable, allegation against an Issuer on corporate responsibility issues. Such allegations can relate to tangible facts, be an interpretation of these facts, or constitute an allegation based on unproven facts.

V.E reviewed information provided by the Issuer, press content providers and stakeholders (partnership with Factiva Dow Jones: access to the content of 28,500 publications worldwide from reference financial newspapers to sector-focused magazines, local publications or Non-Government Organizations). Information gathered from these sources is considered as long as it is public, documented and traceable.

V.E provides an opinion on companies’ controversies risks mitigation based on the analysis of 3 factors: -

Frequency: reflects for each ESG challenge the number of controversies that the Issuer has faced. At corporate level, this factor reflects on the overall number of controversies that the Issuer has faced and the scope of ESG issues impacted (scale: Isolated, Occasional, Frequent, Persistent).

-

Severity: the more a controversy is related to stakeholders’ fundamental interests, proves actual corporate responsibility in its occurrence, and have caused adverse impacts for stakeholders and the Issuer, the higher its severity is. Severity assigned at the corporate level will reflect the highest severity of all cases faced by the Issuer (scale: Minor, Significant, High, Critical).

-

Responsiveness: ability demonstrated by an Issuer to dialogue with its stakeholders in a risk management perspective and based on explanatory, preventative, remediating or corrective measures. At corporate level, this factor will reflect the overall responsiveness of the Issuer for all cases faced (scale: Proactive, Remediate, Reactive, Non- Communicative).

The impact of a controversy on an Issuer's reputation reduces with time, depending on the severity of the event and the Issuer's responsiveness to this event. Conventionally, V.E' controversy database covers any controversy with Minor or Significant severity during 24 months after the last event registered and during 48 months for High and Critical controversies.

Involvement in controversial activities 17 controversial activities have been analysed following 30 parameters to screen the Issuer's involvement in any of them. The Issuer's level of involvement (Major, Minor, No) in a controversial activity is based on: -

An estimation of the revenues derived from controversial products or services.

-

The specific nature of the controversial products or services provided by the Issuer.

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March 2021

.E’S ASSESSMENT SCALES Scale of assessment of the KPI(s) materiality and the associated SPT(s) ambition.

Advanced

The selected KPI(s) reflects the most material issues for the Issuer’s core sustainability and business strategy and address the most relevant environmental, social and/or governance challenges of the industry sector.

Scale of assessment of financial instrument's alignment with Sustainability-Linked Bond and Loan Principles Best Practices

The Instrument's practices go beyond the core practices of the ICMA's SustainabilityLinked Bond Principles and/or of the Loan Market Association’s Sustainability-Linked Loan Principles by adopting recommended and best practices.

Aligned

The Instrument has adopted all the core practices of the ICMA's SustainabilityLinked Bond Principles and/or of the Loan Market Association’s Sustainability-Linked Loan Principles.

Partially Aligned

The Instrument has adopted a majority of the core practices of the ICMA's Sustainability-Linked Bond Principles and/or of the Loan Market Association’s Sustainability-Linked Loan Principles, but not all of them.

Not Aligned

The Instrument has adopted only a minority of the core practices of the ICMA's Sustainability-Linked Bond Principles and/or of the Loan Market Association’s Sustainability-Linked Loan Principles.

An advanced ambition is achieved when the SPT(s) can demonstrate the following: (i) alignment with the 2D scenario/recognized sector standards (ii) a top performance in comparison to sector peers, and (iii) an improvement of the company's performance.

Robust

The selected KPI(s) reflects material issues for the Issuer’s core sustainability and business strategy and address relevant environmental, social and/or governance challenges of the industry sector.

A robust ambition is achieved when the SPT(s) can demonstrate at least two out of three of the following items: (i) alignment with the 2D scenario/recognized sector standards (ii) a performance in line with the average performance of sector peers, and (iii) an improvement of the company's performance.

Limited

The selected KPI(s) does not appropriately reflect material issues for the Issuer’s core sustainability and business strategy and partially address relevant environmental, social and/or governance challenges of the industry sector.

A limited ambition is achieved when the SPT(s) can demonstrate only one out of three of the following: (i) alignment with the 2D scenario/recognized sector standards (ii) a performance in line with the average performance of sector peers, and (iii) an improvement of the company's performance.

Weak

The selected KPI(s) does not reflect material issues for the Issuer’s core sustainability and business strategy and do not address relevant environmental, social and/or governance challenges of the industry sector.

A weak ambition is achieved when the SPT(s) (i) is not aligned the 2D scenario/recognized sector standards (ii) is below the average performance of its sector peers, and (iii) shows a negative trend in the company's performance.

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March 2021

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