First Abu Dhabi Bank P J S C : FAB Equator Principles Report 2022

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Introduction

FAB has been a signatory to the Equator Principles since 2015, these principles are embedded in our Group ESG Risk Framework and Policy, as well as corresponding processes and credit protocols. Guiding us through the project-related environmental and social (E&S) requirements and measures expected from relevant borrowers to minimize E&S risks.

"The Equator Principles (EP) are intended to serve as a common baseline and framework for financial institutions to identify, assess and manage environmental and social risks when financing Projects".

About the Equator

Principles

The Equator Principles (EP) is a leading global framework for determining, assessing and managing environmental and social (E&S) risk across financed projects. It is intended to provide a minimum standard for due diligence and monitoring to support responsible risk-based decision- making.

The EP's requirements have been evolving over time. After the launch of the fourth version (EP4) in October 20201, additional requirements have been established for particularly sensitive projects, including dedicated Human Rights and Climate Change Risk Assessments. In general, the EP applies to all industrial sectors and to five categories of financial products described below when supporting a new project.

Project finance loans

Where total project capital costs are

USD 10 million or more

Project finance advisory services

Where total project capital costs are

USD 10 million or more

Bridge loans relating to projects

With a tenor of less than two years that are intended to be refinanced by Project Finance or a Project-Related Corporate Loan that is anticipated to meet the relevant criteria described in 2 and 3 above

Project-related corporate loans

Where all of the following three criteria are met:

1. The majority of the loan is related to a project over which the client has effective operational control (either direct or indirect).
2. The total aggregate loan amount and FAB individual commitment (before syndication or sell down) are each at least USD 50 million.
3. The loan tenor is at least two years.

Project-related refinance and project-related acquisition finance

Where all of the following three criteria are met:

1. The underlying project was financed in accordance with the Equator Principles framework.
2. There has been no material change in the scale or scope of the project.
3. Project completion has not yet occurred at the time of the signing of the facility or loan agreement.

General

Considerations

The first step under EP implementation is to categorize projects seeking finance, based on the associated potential Environmental

• Social risks and/or impacts. The projects are categorized based on the magnitude of potential risks and impacts into one of the three categories, depending on their type, location, level of sensitivity, and overall scale of the project. The outcome of the classification determines the level of due diligence necessary. The categorization is based on the International Finance Corporation's (IFC) environmental and social categorization process1.

Category A

Projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible, or unprecedented.

Category B

Projects with potential limited adverse environmental and social risks and/or impacts that are few in number, generally site-specific, largely reversible, and readily addressed through mitigating measures.

Category C

Projects with minimal or no adverse environmental and social risks and/or impacts.

1. Equator Principles EP4The Equator Principles_EP4_July2020(equator-principles.com)

Implementation of the

Equator Principles

FAB considers EP related screening and due diligence as part of its regular assessments conducted for project related transactions.

Our Group ESG team supports the business line team members in ensuring EPs are applied, whenever applicable and relevant.

The overall implementation of the EP at FAB follows a six-step process:

• Collect relevant information and documents

• Review and assess the clients' relevant environmental and social (E&S) impact

• Review of the application by the Group ESG team at FAB to ensure that the

In line with Principle 4, all Category A and Category B projects are required to develop an Environmental and Social Management System (ESMP) to address any potential impacts on the environment and society. In case of non-compliance an Action Plan (AP) is established in agreement with the customer.

Training and Capacity Development on EP Expectations

Periodic training and capacity development is a key aspect which ensures that the responsible team members are updated on the evolving nature of E&S risks and impacts and also on the enhanced requirements from EP. We have conducted an EP training for the Group ESG team, which was delivered by an external sustainability consultant. The training covered the updated EP review and assessment process. The training has also equipped the Group ESG team with the expertise and knowledge needed to train internal business lines. Additional EP trainings for business lines are planned for 2023.