Chairperson, Joanne Ling

After the pandemic outbreak continues for more than 2 years, the global economic and trade activities recovered slowly from the huge impact in 2021, and the post-pandemic era was still facing many uncertainties, coupled with the global impact deriving from the Russia-Ukraine war, rising inflation, unstable interest rate policy, unbalanced supply chain, energy and manpower shortages and other issues; all of which are testing the resilience of enterprises in the face of the crisis. It also demonstrated the urgency and importance of sustainable operation. Sustainability initiatives and actions within the country and abroad are getting more attention, such as the Sustainable Development Goals (SDGs), the Global Compact, the Universal Declaration of Human Rights, the United Nations Paris Climate Agreement, the Principles for Responsible Banking, Glasgow Climate Emergency Pact etc., as well as the Domestic Corporate Governance Blueprint, the Green Finance Action Plan, Listed company Sustainable Development Roadmap, the 2050 Net Zero Emissions Pathway and Policy, etc. In addition to responding to external changes in the pandemic development, policy direction and economic environment trend, the Bank's flexible adjustment in operating strategies and execution methods are also pragmatically improving the Bank's various Sustainable development Goals to deepen the sustainability concept embedded in the core corporate culture and business activities, and strengthen the Bank's corporate citizenship strategy to face future challenges and development with better corporate resilience.

The Bank attaches great importance to communication with stakeholders, listens to the voices and needs of various parties and extent of the impact, and responds proactively to stakeholders' interests in issues and controls risk management, while taking the SDGs as the direction for progressive sustainability. The Bank has completed the two-year targets of "S.T.E.P." since 2020:

"S" SASB (Sustainable Accounting Standards Board). The Bank's Corporate Social Responsibility Report has been prepared in accordance with SASB since 2020, focusing on significant financial impact factors related to the banking industry, disclosing more comparable financial performance indicators in the Sustainability Report, providing information for investors' investment decisions, and the 2021 Sustainability Report (hereinafter referred to as the Report) has obtained SASB Commercial Banking Standards Compliance Assurance issued by the British Standards Institute (BSI) for two consecutive years; in addition, this report voluntarily adopted the latest sustainability information disclosure standard “General Standard 2021” (will be officially implemented on January 1, 2023) announced by Global Sustainability Reporting Institute (GRI) to completely disclose the connection and impact between the operating activities and the economy, society, and environment by more stringent and transparent standards, and obtaining BSI's verification of the compliance of this report with the GRI 2021 standard; furthermore, this report discloses the management policy and relevant performance data for the three major topics, which are "information security", "inclusive finance" and "sustainable finance". Ernst & Young CPA firm was engaged for the first time to conduct the assurance review of this part in order to improve the reliability of the Bank's disclosed information and data.

"T" The TCFD structure has been adopted in the Corporate Social Responsibility Report since 2019, disclosing the governance, strategy and risk management of climate change. TCFD has been implemented since 2020. The Bank has proactively signed up to become a supporter of TCFD in 2021, and is the first government-owned bank to obtain third-party verification of TCFD compliance review. The TCFD structure will be used to assess climaterelated risks and opportunities, further quantify the financial impact, and help form a forwardlooking investment and financing policy to mitigate and prevent possible financial losses. At the same time, the Bank will seize the potential opportunities to create earnings value and save operating costs through market participation (investment in sustainable development bonds), product and service development (promotion of green loan products) and resource efficiency improvement (green procurement, green building). The Bank has published TCFD report in Chinese and English for stakeholders' reference since 2022.

"EP" Equator Principles (Equator Principles). The Bank has gradually implemented the Equator Principles spirit since 2017, such as adjusting the investment and financing limits, excluding industries in the negative list, adding ESG review and management factors, and signing up to join the Equator Principles Association on 2022 World Earth Day. In the future, the relevant ESG indicators will be used as important benchmarks. Environmental and social risk management will be internalized into the credit review process of project financing, and risk management mechanisms and process will be established. The Bank also develops green financing products that coexist with economic development and a friendly environment to guide enterprises to make low-carbon transformation. At the same time, the Bank attaches importance to the ESG implementation of investment targets through its financial influence as an institutional investor or as a fund provider, and drives forward positive investment power, striving to strike a balance between economic growth, environmental sustainability and social development.

The two-year target of “STEP” lays the foundation for the Bank's sustainability efforts in core business linked ESG, climate change risk response and industry value disclosure transparency, etc., The Bank will continue to deepen and expand various material sustainability strategies.

Especially while pursuing sustainable business development at the business level, the Bank attaches importance to employee care and equal rights, fulfills the value concept of human rights policy, provides a number of labor conditions (such as leave system, insurance plan, and employee shareholding trust) that are superior to those stipulated by laws and regulations, and sets up multiple benefits measures to support employees' work-life balance (such as birth allowance and childcare services). It also pays attention to the employees' future career development, provides diversified learning channels, so as to possess the necessary functional competency in response to future personal career changes, and strives to maintain professional values. In terms of workplace safety and health management, it monitors the working environment of 186 business locations, maintains the validation effectiveness of the ISO45001 occupational safety and health management system, and provides physical and mental supports such as health examinations and psychological counseling to create a safe, healthy and friendly workplace. The Company has won the "National Outstanding Healthy Workplace - Energetic and Active Award" in 2021.

As a corporate citizen of the social sector, the Bank adheres to the principle of "Take from society, give back to society", giving back to society through concrete actions over the long term, and actively organizing public welfare activities to implement social care (such as caring for the living needs of vulnerable groups, sports talent cultivation, cultural and creative inheritance, and green care actions). It is expected to attract the attention of the public and form the power of common good. During the serious pandemic impact period, in cooperation with government policies, the Bank undertook various bailout loans to help customers alleviate operational or life difficulties, set up various project loans to support entrepreneurship and community development, and promoted financial inclusion and innovation development to provide convenient, fast, and reasonable quality financial services and commodities to achieve social inclusion.

In terms of environmental protection, the Bank adheres to the environmental policy of "LOHAS Environment Protection and Love the Planet", and encourage employees to join healthy vegetarian and walking activities and continuously promotes the plans for energy saving and carbon reduction, climate-related risk management, greenhouse gas inventory and reduction, and supplier management. Through the annual maintenance of the environmental management system (ISO14001), energy management system (ISO50001), and greenhouse gas inventory (ISO14064-1), the Bank effectively manages each resource. In addition, the Bank obtained the certification of the sustainable procurement compliance audit (ISO20400) and water resource efficiency management system (ISO46001) in 2021, understood the impact of its operations on the environment, and established targeted research measures to improve the sustainable management of the environment.

The Bank plans to sign the commitment of Science-based targets initiative (SBTi) in 2022 to align the Bank's business development strategy with the objectives of the Paris Agreement (global warming controlled within 2°C or further within 1.5°C), actively review the investment and financing portfolio and target's carbon reduction strategy, and develop the criteria to review the performance of investment or financing targets in climate aspect, and plan and negotiate with high-carbon emitting enterprises that are not proficient in climate risk management to help them adapt to the low-carbon transformation.

In the future, the Bank will continue to improve corporate governance performance, social care feedback and environmental actions, take green finance as the main axis of its strategy to achieve net zero, enhance corporate sustainability and resilience, steadily achieve sustainable development goals, and promote the SDGs spiritual concept to global partners to extend sustainable value and jointly realize the vision of sustainability.