First Abu Dhabi Bank P J S C : FAB’s Pathway to Net Zero, Wave 1

05 FAB'S PATHWAY TO NET ZERO EXECUTIVE SUMMARY

In addition, we committed to the Partnership for Carbon Accounting Financials (PCAF) in January 2022, indicating that we will assess and disclose the GHG emissions of our inancial portfolio.

As one of the leading banks in the region, we believe that engaging with and supporting our clients in their transition will contribute signiicantly to the Middle East's net-zero goals.

In identifying these three sectors as priorities and in setting 2030 reduction targets as a irst step to achieve net-zero, FAB has:

Unlike ever before, climate change and its wide range of associated and unprecedented impacts need to be addressed

in haste.

The 2015 Paris Agreement set a goal to limit global warming to 1.5°C above pre-industrial levels to tackle climate change and its negative impacts. In order to achieve this target, we collectively need to deliver a net-zero economy by 2050. This can only be achieved through global decarbonisation

so that greenhouse gas (GHG) emissions resulting from human activity are close to zero, and remaining GHG emissions are removed from

the atmosphere.

By announcing the Net Zero 2050 strategic initiative, the UAE became the irst country in the Middle East to declare its commitment to full decarbonisation. To support the UAE's transition and consequent growth ambition, FAB joined the Net-Zero Banking Alliance (NZBA) in October 2021.

Along with reducing our carbon footprint, it is our responsibility to support our clients in reducing their GHG emissions through the operations that we inance, referred to as Scope 3 inanced emissions. We have already delivered c.31% reduction in our GHG intensity in the period 2019 to 2022, per full time employee. In line with the NZBA requirement, FAB's next step in its net-zero journey is to plan for its commitment and set targets to reduce inanced emissions for three priority sectors: oil & gas (O&G), power generation and aviation. These sectors account for c. 80% of our global GHG emissions.

Each sector has been analysed individually while considering the speciicities of both the sector and the region. We also aim to continuously evolve our approach as guidelines, data availability and quality improve.

Following the PCAF standard, we have calculated our inanced emissions across the three sectors, accounting for scope 1 and scope 2 emissions, and scope 3 for the relevant O&G actors. Given the availability of production data for most of our key clients, we have calculated our portfolio production intensity at a sector level. Cross-checks and quality control checks were implemented throughout our process to ensure the quality of the data collected and the consistency of the results obtained.

IEA's NZE scenario expects total O&G sector GHG emissions to decrease signii- cantly by 2030, as economies transition to cleaner energy sources and undergo widespread transformation.

O&G players will not only have to reduce operational emissions but also adapt to declining fossil-fuel demand by diversifying their activities.

This transition will have to be managed responsi- bly, at a pace that is in line with both the growing global demand for energy and the relevant decarbonisation targets. While we acknowledge that the Middle East, with its decade-long expertise in operating eiciently, will maintain its role as the world's preferred energy supplier on the path to net-zero emissions, we intend to support our clients as they accelerate their energy transition. Many key regional players have in fact already committed to net-zero emissions targets.

We have calculated scope 1 and 2 emissions for all segments of the value chain and added scope 3 emissions for upstream and reineries. In line with IEA's NZE trajectory, we have set a target to reduce our oil and gas sector emissions intensity by 7% to 15% across all three scopes by 2030.

1 Supporting our clients in increasing operational eiciency (e.g. minimising laring and reducing methane emissions).

1. Financing hydrogen and ammonia projects.
2. Leveraging carbon capture utilisation and storage (CCUS) technologies.

We acknowledge that achieving our targets is also subject to external dependencies, such as technological advances and the successful execution of our clients' carbon mitigation strategies.

POWER

Power generation is vital to the global energy transition and to mitigate the impact of climate change.

A high share of clean and green energy is particularly crucial to support hard-to-abate sectors in reducing their scope 2 emissions.

The share of renewables in the total electricity supply needs to grow signiicantly. Regional governments such as the UAE, Saudi Arabia and Egypt, are targeting a major increase in the share of renewable energy by 2030, with the ambition of becoming a leader in the clean energy space. This regional dynamic is supported by many of our clients who have already committed to net-zero targets, including a promising pipeline of projects requiring investments of more than USD 55 billion.

In line with IEA's NZE scenario, we are committed to a carbon intensity target for inanced power generation activities that involves a 64% reduction in scope 1 and 2 production intensity by 2030.

This includes phasing out thermal coal exposure. Although our thermal coal exposure only represents 0.4% of our total portfolio, phasing it out will help to reduce our overall portfolio intensity.

Three main initiatives will support this target:

1 Engaging with our clients to support their transition.

1. Financing clean energy technologies such as solar, wind and green hydrogen.
2. Phasing out coal activities.

Coal is the most carbon intensive of all fossil fuels, generating 40% of the world's electricity needs but producing 46% of global GHG emissions, according to the IEA. Phasing out coal use, therefore, has become a key global climate priority, with many countries halting construction of new plants and committing to end public inancing of the fuel by 2022.

Since COP15, the number of new coal plants in operation has dropped by 76% globally due to increased commitments to phase out coal use and a decline in coal inancing. More recently, following COP26, more than 23 countries have made new commitments to limit coal-based power, including ive of the world's top 20 coal-power-using countries. All G7 countries are committed to ending support for new unabated coal-ired power, and all public international inancing for coal power is expected to end by 2022. As banks commit to NZBA, coal production in OECD countries is expected to be phased out by 2030. While the transition in emerging economies will be slower, all global coal use is expected to end by 2040.

FAB's current exposure to coal is small, representing 0.4% of the total portfolio - a relatively low igure when compared with other NZBA signatory banks. In line with our net-zero goals, we have set a commitment to cease all new inancing (Including trade inancing) of thermal coal mining and coal-ired power plants by 2023, in all the geographies in which we operate. This commitment is also relected in our ESG risk framework and policy through the inclusion of thermal coal related activities within our negative/exclusionary screening list.

To ensure a feasible and sustainable transition, we will respect our current standing commitments to clients (including annual renewals until facility end dates). In parallel, we will also engage with existing customers to understand their current transition plans and explore the possibility of

transition inance.

While we will make every eort to reach the target, we acknowledge that our success will be subject to technological advances and the execution of our clients' commitments.

Demand for global air travel is expected to grow substantially over the course of the decade, and eorts to reach net-zero emissions in this hard-to-abate sector will rely on technologies that are still under development or experimental. Thus, as relected by the IEA NZE scenario, the aviation sector's decarbonisation process will only accelerate after 2030.

For our baseline, we have included scope 1 and scope 2 emissions from airline operators and scope 3 from lessors to which we provide aircraft and general inancing. Informed by IEA's NZE scenario for aviation, our target for aviation is a 15% reduction in inanced production intensity by 2030, based on our 2019 baseline. This will position our portfolio below IEA's NZE pathway by 2030.

Based on currently available technologies, we will work towards our target by:

1 Financing leet renewal with funds focused on eicient and next-generation aircraft.

2 Supporting the widespread adoption of sustainable aviation fuels (SAF).

Once again, our success in reaching our target will depend on the pace at which more eicient aircraft and sustainable fuels are developed at scale, as well as the ability of our clients to achieve their own goals.