To our stakeholders:

I am pleased to confirm that Novo Banco reaffirms its support of the Ten Principles of the United Nations Global Compact in the areas of Human Rights, Labour, Environment and Anti-Corruption.
2021 was a very important year. As part of novobanco’s strategic plan, a new sustainability strategy was defined for the three ESG areas - Environment, Social and Governance. In this context, and in what concerns the Environmental pillar, the framework of the ESG strategy is developed in 3 phases. The first, mainly focused on assessing our exposure to climate and environmental risks, the characteristics of our credit portfolio and the definition of a portfolio alignment strategy. The next phase is to understand how these analyses and conclusions should integrate the risk management policy, access to capital markets and the cost of funding and capital. Finally, the third phase concerns the contribution that financial institutions, including novobanco, can have to develop innovative financing structures that better address the challenges of a sustainable society. Our 2021 impact assessment also shows that the social issues are important for our various stakeholders, and therefore it is a topic that deserves our utmost attention. Several initiatives and goals were defined in 2021 to be achieved in 2024 underlying social and financial wellbeing, including digital and financial literacy, and equal gender and equal opportunities.
To implement this renewed strategy the Bank has redefined its sustainability governance model, implementing an assessment and a structured approach to sustainability across the whole Group and a dedicated monthly forum to discuss action plans and monitor progress, with full involvement of the Executive Board of Directors.
In this annual Communication on Progress, we describe our actions to continually improve the integration of the Global Compact Principles into our business strategy, culture and daily operations. We also commit to share this information with our stakeholders using our primary channels of communication.

Sincerely yours

novobanco assumes full and unconditional respect for the United Nation’s Declaration of Human Rights and for the requirements of the International Labour Organization. novobanco has a Human Rights and Non Discrimination and Equal Gender Policy, publicly available at the company’s website which further reinforces its internal regulations, labour practices and overall corporate culture of protection and respect for people and human rights in all the geographies where it operates. novobanco’s policy for Human Rights is expressed through the commitment established with the Global Compact Principles, expressly banning child labour, forced or compulsory labour occurring, discrimination and operations identified in which the right to exercise freedom of association and collective bargaining may be at significant risk.
First and foremost, novobanco promotes the respect for the national legislation and regulations, while also stressing the need to abide by the United Nations Universal Declaration of Human Rights, the OECD Guidelines for Multinational Enterprises and the International Labour Organisation’s principal conventions
This policy covers all novobanco employees.

Please see in the following links novobanco the Humas Rights and Equal Opportunities Policy
file:///C:/Dados/B15032/GoogleChrome/Pol%20Direitos%20Humanos%20UK%20(1).pdf
file:///C:/Dados/B15032/GoogleChrome/Pol%C3%ADtica%20de%20Direitos%20Humanos%20(3).pdf
file:///C:/Dados/B15032/GoogleChrome/pol%20de%20igualdade%20de%20oportunidades%20UK%20(2).pdf
file:///C:/Dados/B15032/GoogleChrome/pol%20de%20igualdade%20de%20oportunidades%20(1).pdf

novobanco’s activities are mostly developed in countries where local legislation ratifies the International Labour Organization Conventions, namely in Portugal where the headquarters of novobanco are located and where policies and principles applicable to all companies are defined. In countries outside the OECD, novobanco acts in compliance with the same labour laws regarding Human Rights codes and standards and non-discrimination policies rules and standards. The Bank has nonetheless published the Universal Declaration of Human Rights on its intranet.
novobanco’s relationship with all its employees is based on ensuring equal opportunities for all. To establish this behaviour novobanco has a Non Discrimination Policy. This Policy holds a crucial and indispensable role in the safeguarding the principle of equal opportunity and the duty of non discrimination in all countries was it operates. The essential purpose of novobanco’s non-discrimination policy, available in company website
is to safeguard the principle of equal opportunities and the duty of non-discrimination. In the recruitment process of its employees, novobanco observes the principles of non-discrimination by reason of gender, race, skin colour, socioeconomic conditions and sexual orientation, it ensures adequate working conditions to handicapped employees and makes sure that practices which may lead to instances of discrimination in any possible form are prevented and monitored.
Please see in the following links novobanco the Humas Rights and Equal Opportunities Policy
file:///C:/Dados/B15032/GoogleChrome/Pol%20Direitos%20Humanos%20UK%20(1).pdf
file:///C:/Dados/B15032/GoogleChrome/Pol%C3%ADtica%20de%20Direitos%20Humanos%20(3).pdf
file:///C:/Dados/B15032/GoogleChrome/pol%20de%20igualdade%20de%20oportunidades%20UK%20(2).pdf
file:///C:/Dados/B15032/GoogleChrome/pol%20de%20igualdade%20de%20oportunidades%20(1).pdf

novobanco takes one step further, to communicate and spread compliance and good practices to all employees and to all stakeholders, by publishing its code of conduct. In 2021, novobanco updated its code of conduct and conducted an online training session to all employees in 2022, to promote the principles and values that shape novobanco’s conduct. In 2021 NOVO BANCO published several articles and news at its intranet about the Code of Conduct.
novobanco’s Code of Conduct (available in Portuguese and English) ensures compliance with all the applicable labour rules, which are considered in the national labour legislation that ratifies the International Labour Organisation Conventions. The Code of Conduct is applicable to all Novo Banco Group, including non-OECD countries, where these principles are also applied. In the cases where the violation of the principles addressed in the Code of Conduct is also a violation of a law, regulation or internal rule, the latter are the ones to be primarily considered and invoked for the purposes of disciplinary action. The function of compliance, audit and the mechanisms for the anonymous reporting of irregularities (whistleblowing), minimize the risk of misconduct in the Bank´s operations, whether among Employees or in the Bank’s service providers.
Please see in the following links novobanco Code of Conduct
file:///C:/Dados/B15032/GoogleChrome/Codigo_Conduta_Atualizada%20(3).pdf
file:///C:/Dados/B15032/GoogleChrome/Code%20of%20Conduct%20(5).pdf

Up till 31 December 2021, and given the notifications and the questions related with the internal regulations, mainly related with the violation of internal regulations and negligence in the exercise of functions, 9 violations were detected related with the internal regulations of the Bank, which resulted in the following sanctions:
• 4 cases of dismissal without any indemnity or compensation;
• 2 case of days of suspension without pay and with loss of seniority;
• 3 cases registered reprimands.
As regards the Portuguese society in general, the Global Compact Principles are already enshrined in the national legislation. The General Inspectorate for Labour and Social Security is the entity responsible for making sure these principles are followed, up to novobanco has been following the legislation and standards mentioned above.
novobanco’s Human Rights concerns are extendable to the bank’s supply chain, therefore novobanco published a set of principles of conduct of sustainable development which complement the contractual rules established with its Suppliers. Currently, all relevant suppliers must to subscribe the “Principles for Suppliers of novobanco” based on Global Compact Principles. These Principles can be found in the Suppliers Portal, the regular channel for communication with this group of stakeholders, which may register in the portal as certified suppliers of novobanco companies. In the certification process suppliers must reply to a number of questions intended to assess their sustainability practices, namely concerning labour issues, ethics, hygiene, health and safety in the workplace, and environmental management.

Please see in the following links the Principles for Suppliers of novobanco

https://www.novobanco.pt/site/cms.aspx?plg=E983E86F-A340-40D0-A500-0F83365BC544

file:///C:/Dados/B15032/GoogleChrome/Principles%20of%20Relationship%20with%20the%20Suppliers%20(2).pdf

file:///C:/Dados/B15032/GoogleChrome/Princ%C3%ADpios%20Relacionamento%20com%20Fornecedores.pdf

novobanco has a scoring process that permits to rank suppliers in accordance with the practices reported in the certification process, with each supplier being subsequently informed of its score. This assessment mechanism not only permits to identify the suppliers with the best practices, but also fosters a better engagement with the suppliers and a sharing of recommendations and experiences about good environmental and social practices along the supply chain. On 31 December 2021, 4,747 entities had applied for registration in the NBG Supplier Platform, of which 569 are registered suppliers with their process duly completed and updated. Around 22% of novobanco’s suppliers registered in the Portal have a score of excellent and 84% have a positive score cumulatively, which is better than in 2020
The respect for Human Rights is part of the novobanco value chain, including the main stakeholders: Clients, Employees, Shareholders and Suppliers.
Please consult this policy:
file:///C:/Dados/B15032/GoogleChrome/Principles%20of%20Relationship%20with%20the%20Suppliers%20(2).pdf

file:///C:/Dados/B15032/GoogleChrome/Princ%C3%ADpios%20Relacionamento%20com%20Fornecedores.pdf

novobanco subscribes the Universal Letter on Human Rights, as a Portuguese company novobanco also subscribes the OECD guidelines for Multinational Corporation and the Global Compact Principles. All those principles are covered by the bank code of conduct, our sustainability policy and other corporate values.
Please see the policy in the following links:
file:///C:/Dados/B15032/GoogleChrome/Code%20of%20Conduct%20(2).pdf
file:///C:/Dados/B15032/GoogleChrome/Pol%C3%ADtica_de_Sustentabilidade_2022%20(1).pdf
file:///C:/Dados/B15032/GoogleChrome/Pol%20Direitos%20Humanos%20UK%20(1).pdf
file:///C:/Dados/B15032/GoogleChrome/pol%20de%20igualdade%20de%20oportunidades%20UK%20(2).pdf

The monitoring of the Code of Conduct and other internal rules, regarding clarification of employees in respect to its content and application, is the responsibility of the Compliance Department. The Compliance Department reports regularly to the Audit Committee and to Board members all the violations to the code of conduct and other internal rules.
As to the internal regulations, up till December 2021, several notifications and issues related to same, mainly relating to conflict of interest and professional secrecy issues were received. Up till 31 December 2021, and given the notifications and the questions related with the internal regulations, mainly related with the violation of internal regulations and negligence in the exercise of functions, 9 violations were detected related with the internal regulations of the Bank, which resulted in the following sanctions:
• 4 cases of dismissal without any indemnity or compensation;
• 2 case of days of suspension without pay and with loss of seniority;
• 3 cases registered reprimands
The Principles of Relationship with the Suppliers of Group novobanco is monitored by the Procurement team. The Department is building a formal approach to these visits, to formalize novobanco procedures concerning non compliances, and further requirement to each of the visited suppliers.

The right to free association is enshrined in the Portuguese legislation and is a recognized right of all the Employees. novobanco has always followed a policy of freedom of association and effective recognition of the right to collective bargaining. Among these, we could refer our respect for and support to our employees’ trade union membership, the existence of a trade union secretariat and a procedure for Information and Consultation, in compliance with a community directive.
novobanco does not impose any restrictions at this level, either in Portugal or in the other countries where it operates. In novobanco Portugal, the percentage of unionized employees rounds 93%, in line with the average of the Portuguese banking sector.
novobanco has an active Workers Council, elected by the employees, with whom the HR Department meets on a monthly basis to discuss and analyze several HR issues: social wellbeing, employees’ labour conditions, strategic, organizational or functional improvements and all relevant facts impacting the Employees.
Finally, novobanco is represented on the Portuguese Association of Banks who takes part in the Financial Sector's collective bargaining discussions.
novobanco’s relationship with all its employees is based on a policy of equal opportunity
Please see the policy in the following links.

This policy holds a crucial and indispensable role in the safeguarding of the principle of equal opportunity and the duty of non discrimination. With this aim novobanco has, a non discrimination policy, safeguarding the principle of equal opportunity and the duty of non discrimination.
file:///C:/Dados/B15032/GoogleChrome/pol%20de%20igualdade%20de%20oportunidades%20UK%20(2).pdf
file:///C:/Dados/B15032/GoogleChrome/pol%20de%20igualdade%20de%20oportunidades%20(1).pdf
In the scope of the Human Resources development policy, the focus on employees’ training is a fundamental pillar in the development of the skills and careers of this group of stakeholders. Because novobanco believes that it is through knowledge that talent is developed, recognized and retained, novobanco invests on an ongoing basis in the design and implementation of distinctive and motivational training to ensure the improvement of performances and the development and progress of the employees within the organization
The Bank thus permanently invests in training activities that are comprehensive in terms of their target recipients, diverse in terms of methodologies and challenging regarding their objectives and required results, at both technical and behavioral levels.
In a context where the market is evolving at an accelerated pace and challenges, both external and internal, are increasingly ambitious, investment in transformation has become crucial for novobanco.
The Bank provided 42.8 hours of training per employee in 2021. Because the practical learning at novobanco is highly valued, on-the-job training provided in the 20 School Branches remained a prime training methodology. This training method continued to be much used in Retail, not only to train new employees but also to reinforce the commercial and technical skills of employees who changed their functions. The on-the-job training is provided all over the country, based on the concept of learning by doing, this is a pioneering project in Portuguese banking, which over the years has broadened its scope of action and is now responsible for:
• the initial training framework for new employees;
• the reinforcement of skills of current employees;
• the development of appropriate skills to support functional mobility;
• the monitoring of current employees returned from extended leaves;
• support in the implementation of strategic projects.

Training is one of the Novobanco Group’s main investments in the creation of competitive human capital. The implementation of the novobanco Group’s training plans is based on 5 focusing on five areas of knowledge:
1. Training on the New Distribution Model- novobanco decided to transform its attention model, not only the visual aspect of its branch spaces,
but above all in the new way our employees receive and treat our clients. In 2021, 859 employees from 105 branches received 23,500 hours of on-site training on the new customer service choreography, the new spaces, the new applications and the new equipment adopted.
2. Legally Mandatory Training - This is the indispensable knowledge that all our professionals, each in their different jobs, must have in order to perform their functions correctly. We provided 136,762 hours of e-learning training, involving 4,100 employees. These training initiatives mainly focused on the Markets and Financial
Instruments Directive (MiFID II), the IDD - New Insurance and Reinsurance Distribution Law, the Mortgage Credit Marketing Directive, the Prevention of Money Laundering and Terrorist Financing, the General Data Protection Regulation, and Information Security. The methodologies used in training vary between e-learning, classroom training, coaching or on-the-job training.
3. Training on Sustainability -In 2021, due to the strategic importance of the topic, it was decided to invest in training on Sustainability in the financial sector, which covered 2.5 thousand employees, who completed a total of 58.6 thousand hours of training.
4. Training provided by the network of 17 School Branches and by the Human Capital Department Team that coordinates the School Branch - At novobanco, on-the-job training is also provided by the network of 17 school branches distributed throughout the country. Based on the concept of learning by doing, this is a pioneering project in banking in Portugal, which over the course of 16 years has maintained its scope of action, and is today responsible for the initial training of new employees who go into the retail commercial area, for strengthening the skills of current employees, for the development of appropriate skills to sustain functional mobility and for monitoring current employees returning from prolonged absences; 69 training programmes were carried out, totaling 2 thousand hours of training.
5. Technological Training - IT and digital contents are increasingly relevant for organizations, requiring continuous skills updating on the use of the organization’s main IT tools and in the technological solutions adopted by the entire business. In 2021 we provided 2.5 thousand hours of technological training to 114 employees.
Always concerned with the well-being of its employees, novobanco offers them a set of benefits and programmes that reflect a permanent diagnosis of the internal challenges as well as market best practices. Built through a relationship of true partnership between the Bank and its Employees, the NB Work & Life programme aims to foster a balance between the professional and the personal life of the employees. This programme is also part of novobanco's Social Dividend Model. Under this programme the employees have access to a set of benefits that go beyond legal requirements and which afford them more time for their personal life. A set of targets to be reached by 2021 was therefore set in terms of adhesion to each of these benefits. By enhancing staff motivation and satisfaction, these initiatives contribute to increase talent retention at novobanco. Since the programme was implemented in 2017, several benefits have shown an excellent response, namely access to takeaway meals, leave on special days (birthdays of the employee or his/her children, 1st day in the first year of compulsory schooling), and the NB Early Friday or Late Monday plan (flexible working hours). Takeaway meals in particular have registered growing interest on the part of the employees as well as increasing impact at internal level. The takeaway service was implemented by novobanco in all its 3 canteens and bars located in the areas of greater concentration of employees, which provide nutritionally balanced meals at a low cost - in fact the Bank was the first entity in Portugal to adopt the concept of 'nutrition traffic light'. These takeaway/ delivery services were maintained despite Covid-19. In 2021, due to the lingering pandemic context, novobanco relaunched the package of special benefits to tackle possible financial needs felt by families, in addition to access to loan moratoria that had already been guaranteed. The bank also rewarded the employees who were on the front line in the response to the pandemic emergency in 2021, granting 2 days of additional leave that they could take during the year.
During 2021, an attempt was always made to establish normality despite the pandemic context. The activities that had been suspended were resumed and adjusted to this situation. The employees’ General and Family Medicine, Psychology, Psychiatry and Nutrition consultations alternated between face-to-face and remote, according to the evolution of the pandemic and the employees’ preference. The same occurred with occupational health consultations. The clinical posts that offer a set of services in privileged conditions to the employees, both preventive and curative, were always in operation. In terms of Occupational Medicine, there was a great additional focus on catching up the regular medical examinations that had been suspended between April and August 2020 on the recommendation of the General Health Directorate (DGS).
In 2021, a total of 3 007 occupational medical exams (initial, regular, and one-off), 11 952 medical procedures (appointments and prescriptions) and 6 772 nursing acts were carried out by these services. Also, besides medical screening tests, the Bank permanently provides psychiatry and psychology appointments for all employees. Furthermore, the Bank performs a series of screening checks (cardio-vascular, oncologic, eye tests and executive checkups, as part of the Risk Prevention and Control programs). As regards curative medicine, several medical specialties are available, with the following appointments in 2021:
• General Practice - 11 952 appointments;
• Mental Health (psychiatry and psychology) - 928 psychiatry and psychology appointments;
• Nutrition - 383 appointments.
novobanco understands that absenteeism is one of the problems the bank faces and which very often is related to questions that go beyond mere illness or accident.
Being aware of this, novobanco, through its clinical services, namely psychiatry services sought to understand and assess the reasons behind long term absenteeism (exceeding 30 days) and, together with the employees, find solutions for those who are on sick leave.
novobanco’s concerns with health and safety at work aim to minimize accidents at work and occupational illnesses, and to protect the integrity and capacity for work of its employees. In this regard, novobanco Group regularly carries out risk assessments of its work places through safety audits, ergonomic assessments of the work positions and Identification of Dangers and Risk Assessment of its Activities (IPAR).
novobanco has a policy concerning the attribution of allowances and assistance under its Internal Social Responsibility Programme that covers the following areas:
a) Educational Support
Attribution of child, school grants, scholarships and support to children and youth with special needs
• 398 early child benefits worth 454 382.08 Euro
• 224 school grants worth 164 119.40 Euro
• 91 special needs allowances worth 87 440.00 Euro
b) Senior Support
Co-payment of expenses with senior residences, day-centers, home support, medicines and other staple goods:
68 allowances worth 124 720.00 Euro

The right to free association is enshrined in the Portuguese legislation and is a recognized right of all the Employees. Novobanco has always followed a policy of freedom of association and effective recognition of the right to collective bargaining. Among these, we could refer our respect for and support to our employees’ trade union membership, the existence of a trade union secretariat and a Procedure for Information and Consultation, in compliance with a community directive. Novo Banco does not impose any restrictions at this level, either in Portugal or in the other countries where it operates.
Novobanco trade union meets 4 times a year with the Human Resources Committee, compose by the Head of Human Resources Department of all novobanco Group Enterprises. There are 3 bodies with a seat in trade unions that meet with the HR Management and with the Bank's Board of Directors. These parts discuss with trade unions issues, concerning social wellbeing, the climate in the organization, the improvement of the Employees' conditions, strategic, organic or functional reorganizations and all relevant facts impacting the Employees. 93% of our employees are trade union members and represented by an independent trade union or covered by collective bargaining agreements.
Finally, novobanco is represented on the Portuguese Association of Banks who takes part in the Sector's collective bargaining discussions.

The monitoring of the labor indicators is carried out on a biannual basis and some of them on a quarterly basis, being presented every month to the CEO and made public annually in the sustainability report on the Bank's website.
https://www.novobanco.pt/institucional/sustentabilidade/negocio-sustentavel/relatorios-de-sustentabilidade

The financial sector is one of the main drivers of the economy, playing a fulcral role in the access to capital for diverse sectors, thereby performing an important function in promoting sustainable development and in tackling climate change, one of the burning issues of the day. One of the greatest challenges for the financial sector has been that of making sustainable development "climatically" possible.
The novobanco Group, following the guidelines of the World Bank, and Global Compact Principles recognizes that climate change is one of the main concerns in the world, causing an undeniable direct impact on health and on economic growth. Therefore, novobanco has established an environmental management system, where novobanco Group reinforces its commitment to conduct its business in an environmentally responsible manner. This commitment is inherent to its assessment of the environmental risks and impacts arising from the activity of the novobanco Group and also resulting from the provision of financial products and services to its clients.

novobanco assumes responsibility for the promotion of environmental protection in the exercise of its business. In this regard and in order to reduce its direct and indirect environmental impacts, the Bank assumed a commitment regarding efficient consumption, waste reduction and minimization of emissions, framed within an Environmental Management Program, which besides promoting changes in the patterns of consumption, in the medium term it will enable a reduction in costs in terms of the consumption of electricity, water and paper.
Both employees and management are motivated to reduce the bank's environmental footprint and to make its operations increasingly eco-efficient.

2020 – 2021 novobanco footprint reduction:
• Electricity consumption: -23,1%
• CO2 Emissions -18,5%
• Photocopy Paper -25,5%
• Water -11,6%
Under its commitment to reduce its environmental footprint novobanco is consuming, since November 2021, green electricity, from renewable sources, in all its buildings and branches where this option is available (more than 95% of its facilities), and this measure has been certified by its electricity supplier.
novobanco has also fostered a "paperless" culture by reinforcing dematerialization processes, namely formalization with digital signatures (Phygital project), and by reducing printing in the various back-office activities. In 2020, novobanco started its Phygital project, whereby some of the business processes are being dematerialized and formalized through a digital signature, thus contributing to a paperless organization with a paperless culture. In 2019 and 2020, the pilot years of the project, the bank saved 0.21 tons of paper. In 2021, the first year of the phygital rollout, this project allowed the bank to avoid the consumption of 13.5 tons of paper and 14 million liters of water otherwise used in its production. It is the Bank’s expectation that by 2024 the Phygital project will have avoided a cumulative consumption of around 147.4 tons of paper (minus 154.2 million liters of water per year).
novobanco promoted also the dematerialization of communications sent to customers, providing the respective documents online. Novobanco sends most of banking documents to its clients in digital format (credit card statements, deposit certificates, account entry notices, integrated billing notices, and sundry notices), which in 2021 permitted to reach an overall level of dematerialization in communication to clients of 90%, which compares with less than 50% in 2014.
The information’s are available in novobanco Website Sustainability report file:///C:/Dados/B15032/GoogleChrome/novobanco%20sustainability%20report%202021%20(1).pdf

novobanco is also aware of the indirect impact on the environment. In compliance with the 7th Global Compact Principles, in the context of the transition to a low-carbon economy, the Bank has signed, in 2019, the “Letter of Commitment for Sustainable Finance in Portugal”, which aims to contribute to the promotion of sustainable investment practices in the country, with the purpose of accelerating the process of transition to a carbon neutral economy by 2050. The letter gives continuity to the work that has been developed by a “Reflection Group” that includes the main players in the financial sector in Portugal, among which novobanco, coordinated by the Ministry of the Environment and Energy Transition (MATE), in partnership with the Ministries of Finance and the Economy. With the signature of the letter, the Bank undertook the following commitments:
• to engage in a debate on sustainability and environmental, social and governance risks and opportunities at Board level of financial institutions, with a view to factoring in these risks and opportunities in the definition of their strategies;
• to provide training in sustainable finance for employees at different levels of the organisation, including at Board level, with a focus on the areas of credit risk analysis, financial products, and commercial and/or production
• to gradually integrate environmental, social and governance criteria in financing and investment analysis.
To Follow up:
• the review the ‘PME Líder’ and ‘PME Excelência’ criteria to gradually incorporate sustainability issues into these criteria and accept the possibility of creating a ‘Green SME’ or ‘Sustainable SME’ category;
• participation in future works stemming from the Reflection Group for Sustainable Finance
The bank also participated in another two working groups on Sustainable Finance, promoted respectively by the Portuguese Association of Banks and the Portuguese Association of Investment and Pension Funds and Asset Management Firms. These groups address the indirect impact of the financial sector on the environment, analyzing several topics - taxonomy, environmental risk, the principles of responsible banking, green label, among others - that are on the agenda of the day, being evaluated by several regulators and entities in Europe and worldwide.
Striving to reduce its indirect environmental impact and to build a strong and lasting relationship with the clients, and respond to their concerns about climate change, novobanco is working to continually improve the offer of products with environmental concerns. Current offer includes:
a) the first Portuguese neutral emission Accounts - 18.31, to the retail segment. In the context of transition to a low-carbon economy, the Bank aims to contribute to the promotion of sustainable investment practices in Portugal, and in so doing help accelerate the process of transition to a carbon neutral economy by 2050. In this context and also to build a strong and lasting relationship with its clients, the Bank restructured in 2020 the NB 18.31 account by adapting it to the needs of younger age groups and providing for the neutralization of its carbon emissions. These accounts, NB 18.25 and NB 26.31, designed to have a low environmental impact, are also totally carbon neutral. This is due to the fact that they are online accounts and therefore have very low emissions, and because these emissions are neutralized in accordance with the PAS 2050:2008 methodology, which analyses the entire life cycle of products and services. With these 3 accounts the bank already neutralized the equivalent to 2 290 round-trip single flights between Lisbon and London. These accounts neutralize unavoidable emissions by supporting the Soil & More project, a green waste composting project in South Africa that not only reduces carbon emissions but also contributes social and economic benefits for local communities and sustainable development and Kamuthi project, a photovoltaic solar park project to replace the production of energy from coal plants. The NB 18.31, NB 18.25 and NB 26.31 accounts have an estimated carbon impact of about 944g CO2eq/year. At 31 December 2021, novobanco had 156 797 novobanco 18.31, 18.25 and 26.31 Accounts with offset emissions, which corresponds to the neutralization of 1 700 tonnes of CO2, of which 202 in 2021. These accounts have already permitted to neutralize the equivalent of emissions from 308 single return flights between Lisbon and London.
b) Structured Products - whose remuneration is indexed to the share performance of companies that stand out for leading social and governance changes towards environmental goals. The selection of companies to integrate these products is subject to a rigorous assessment process and criteria, which was further strengthened in 2021 not only in line with the Bank's risk policy, but also with industry-sector exclusion criteria (companies producing or selling tobacco, or engaged in coal mining and nuclear energy are not eligible), and criteria governing the exclusion of companies engaging in practices involving violations of human and labour rights, including child and/or forced labour. When manufacturing, construction, transport, tourism, agriculture and forestry, electricity, gas and oil companies are at stake, the Bank undertakes to assess their environmental and social performance, and will not include companies with:
• air pollutant activity: > 50% of turnover, or
• Reduced the weight of their air polluting activity in the last 5 years by: < 5%, or
• Have no defined environmental objectives.
The ESG and ECO structured savings products subscribed in 2021 represent an investment of €88.3 million, making up a cumulative investment of €457.7 million in subscriptions as at 31 December 2021.
The ESG and novobanco ECO Structured Products account for 63.2% of the total structured product portfolio that novobanco makes available to its clients. Novobanco received the “Best Performance Distributor, Portugal” award, given by SRP (Structured Retail Products), of the Euromoney Group, seeing internationally recognized its Structured Products offer.
c) The mortgage loans offer also has an environmental component whereby the client may benefit from a spread reduction when buying a property with A+, A or B certification. In 2021, there were 106 loans granted based on this criterion.
d) The ‘Casa Eficiente’ 2020 line (Efficient Home line) continues to be part of the offering, providing favourable conditions in transactions that promote the improvement of the environmental performance of private residential buildings.
e) Credit Line for Decarbonization and Circular Economy – novobanco also offers its small and medium company’s customers the, a credit line to finance the implementation of sustainable projects. This line of financing allows the investment in existing equipment by other more innovative, modern and efficient ones, investment in renewable sources for self-consumption in the production process or in circular strategies for any stage of the product / service life cycle, the implementation of monitoring, control and performance devices that allow optimizing the conditions of use, energy consumption and consumption of raw materials, among many other projects.
f) Personal Loan for Hybrid and Electric Vehicles - In October 2021, the Bank introduced in the pricing strategy of the Car Personal Loan (for new and used vehicles) a 1% bonus for Vehicles eligible for green mobility (plug-in, hybrid electric and nonelectric hybrids).
g) ESG Funds - More than 1,100 ESG funds that invest in companies committed to the environment and society, and to high standards of governance. The group classifies these funds into two categories:
• Category I - Article 8 SFRD (Sustainable Finance Disclosure Regulation) - funds that invest in companies that have environmental, social and governance concerns. 28 funds with an investment of €162mn. 46% weight in the total portfolio of distributed funds
• Category II - Article 9 - funds that have sustainable - 3 funds with an investment of €188mn. 54% weight in the total portfolio of distributed funds.
h) NB Momentum Sustentável Fund- Offers holders access to a diversified portfolio of assets of companies that adopt the best practices in terms of ESG criteria with the purpose of achieving a consistent long-term valuation based on the three pillars of Sustainability. A minimum of 75% of the direct investment component of the fund is invested in companies with an ESG rating from Eikon above 50 points. The Fund will invest at least 85% of its net asset value in shares and other securities which are convertible into shares or give the right to subscribe shares. In 2021 it had an invested amount of €181.32mn and a weight of 20.2% in national funds under management and 1.8% in total funds under management.
In 2019, and within the scope of the commitment to reduce CO2 emissions, the Bank signed the Business Ambition for 1.5ºC letter, a document presented by the United Nations Global Compact, with the following main objectives:
▪ achieve the transition to a low carbon economy;
▪ avoid overheating the atmosphere.
This appeal comes in line with the “Global Warming of 1.5ºC”, a report presented by the IPCC that addresses the negative impacts and risks arising from the rise in temperature, alerting to the urgency of establishing measures to prevent this warming.
With this signature, the Bank assumes its commitment to preserve the planet and limit the temperature increase to 1.5ºC by 2050, and undertakes to submit a scientific project to reduce the CO2 emissions resulting from its activity within 24 months of the publication of the scientific criteria for the assessment. novobanco expects to be able to submit its project in 2022.

novobanco remains strongly committed to the reduction of its energy consumption. Always taking further this commitment, the Bank has implemented several initiatives, including:
• Reduction of the number of consumption locations - branch network and buildings;
• Installation of higher energy-efficient lighting and equipment (ex: HVAC);
• Re-implementation of an alarm system for anomalous consumptions and for equipment connected but not in use.

novobanco maintains its commitment to reduce the environmental footprint resulting from its activity and one of its main challenges is to meet the objectives set for 2020 through initiatives aimed at lowering its environmental impacts. The performance so far permits to be optimistic regarding the achievement of the targets, mainly due to the continuous consolidation of saving initiatives. In 2021 new goals were evaluated for 2024 in terms of energy and paper consumption, increasing document digitalization, reducing CO2 emissions, more sustainable products and aligned with the taxonomy.

ESG risk management is being integrated in the global sustainability framework of the novobanco Group, which comprises the following elements:
• The group-wide sustainability strategy, which sets the objectives, targets, actions and respective timings for the business areas; the internal governance, internal control and risk management strategy; the internal activities (i.e., own operations) strategy; and the internal and external reporting strategy.
novobanco’s disclosure approach regarding its sustainability objectives, such as: a) reduction of direct GHG emissions, in line with the global objectives of the Paris agreement; b) increased use of ‘sustainable finance’ instruments, namely through the commercial offer and investment policies, channeling direct financial support to the transition of the Portuguese economy; and c) adequate management of climate transition risks, systematically identifying and controlling its main factors.
The monitoring of the environment indicators is carried out on a monthly and quarterly being presented every 3 months to the CEO and made public annually in the sustainability report and on the Bank's website.

For novobanco Group the existence of a framework of values and principles that lead to all actions is fundamental, having for this purpose identified 10 guiding commandments.
According to what is established in these commandments the Group focuses its activity on a set of values and principles – of which ethics and transparency are a part – that are materialized in compliance with laws, internal rules and codes of conduct, seeking to guarantee a transparent management free from conflicts of interest.
Novobanco Group has a set of principles and policies governing its relationships with its employees, namely:
• Conflict of Interest Policy
• Policy for Transactions with Related Parties
• Whistleblowing Policy
• Anti-Bribery &Corruption Policy
• General Risk Management Policies for Money Laundering and Terrorist Financing
• Code of Conduct
• Human Rights Policy
• Policy of Non-discrimination

Please see the policies in the following links

https://www.novobanco.pt/institucional/sustentabilidade/negocio-sustentavel/principios-orientadores
https://www.novobanco.pt/institucional/o-novobanco/lideranca/outras-politicas-do-banco
Regarding the last Global Compact principle, novobanco has a Code of Conduct for Employees available in Portuguese and English, translated, with several rules that for example stipulates that they should not accept any kind of offer or benefit liable of compromising their impartiality and loyalty to the Bank.
The Code of Conduct aims:
a) To disclose the principles by which novobanco Group companies shall steer their
activities;
b) To promote an ethical conduct aligned with the values of the NB Group by the Employees;
c) To promote respect and compliance with all applicable laws and regulations;
d) To create a transparent system of relationships of Employees with the outside.
The Code of Conduct is not of an exhaustive nature and specifically addresses the need to comply with applicable laws, regulations and internal rules, such as:
• Code of Conduct,
• Conflicts of Interest Policy,
• Related Party Transactions Policy,
• Whistleblowing Policy,
• Policy on the Prevention of Money Laundering and Terrorist Financing
• Board of Directors and Supervisory Corporate Board Remuneration Policy and Employees Remuneration Policy
In situations of violations of the principles addressed in the Code of Conduct that consist also in a violation of a law, regulation or internal rule, disciplinary actions are applicable.
For the employees to be fully acquainted with the Code of Conduct, a training course Code was held in 2022.
novobanco has also an Anti-Money Laundering and Terrorism Financing System and Conflict Prevention. novobanco Group is totally committed to opposing any practice that may involve fraud and/or that may be included in the classification of money laundering, and terrorism financing undertaking, to report it to the competent authorities. Fraud, money laundering and terrorism financing are a threat to the financial system in general and to the banking activity in particular. The novobanco Group is dedicated to continuing to develop prevention and internal control mechanisms which help to combat this illegal activity.
Novobanco is strongly committed to the growing internalisation of a culture of compliance, namely with regard to the reporting of undue or irregular behaviours or behaviours that go against the law, the regulations and the Bank's internal policies.
To this end, in February 2018 the GSB and the EBD of novobanco approved the Whistleblowing Policy, which was subsequently communicated to the employees and published in the Bank's institutional website, at: https://www.novobanco.pt/site/cms.aspx?plg=3AE91E8E-AAFB-4BD0-8C6A-07823384AEE3.

The ability to detect and prevent activities capable of constituting money laundering and terrorism financing, stems directly from the knowledge from banks of certain key elements relating to their counterparts and respective transactions.
Given the growing importance that the fight against phenomena such as money laundering and terrorism financing has assumed, is necessary a greater care in identifying weaknesses and areas of greater exposure to ensure the existence of adequate methods to control and mitigate the risks inherent to transactions and counterparties.
To that end, novobanco Group, using software tools with internationally recognised results to complement the experience of its human capital, has created and developed valuation models that will ensure that greater scrutiny is applied where this proves more necessary.
Novobanco Group has in place an automated risk assessment model that, based on the mandatory characterising elements, ranks the counterpart as to the potential risk it poses, whilst screening the prospective counterparties against exception lists.
The risk assessment model and screening is applied as soon as the account is opened, minimizing the likelihood of the Bank inadvertently starting a business relationship with persons or entities recognisably suspect of involvement in money laundering or terrorism financing. Entities that present increased risk are subject to further review by the Compliance Department that must approve the final acceptance of the counterparty.
The model of risk assessment and filtering is also applied on the inclusion of new persons in existing accounts.
Additionally the entire database of existing clients is regularly screened.
Not limiting itself to the analysis of statistical data the bank also looks at behaviour, monitoring the daily transactional activity.
This transaction monitoring being a responsibility of financial institutions becomes more complex as the volumes in question increase.
To this end the Bank has a software tool that, based on risk principles, analyses the transactional profiles of the accounts, generating automatic triggers for situations that appear not to match the pattern expected for each contract.
International transactions are further monitored for possible violation of international embargoes or sanctions, through an online screening process against the exception lists, covering the full contents of the operations support message, with doubtful situations being suspended for verification.
After analysis and detailed investigation, situations detected that confirm the existence of sustained grounds for suspicion, are duly communicated to the competent authorities who will take the steps they deem appropriate, in strict compliance with the legally established duties.
novobanco Group, complying with its regulatory obligations, develops training exercises in preventing money laundering and terrorism financing for all its employees (commercial and central structures, including senior management). Training can be online or in person, the latter mainly directed to new employees, in order to equip them with skills that enable them to collaborate with the control functions in mitigating the risks inherent to the execution of their functions. Novobanco Group, complying with its regulatory obligations, develops training exercises in preventing money laundering and terrorism financing for all its employees (commercial and central departments, including senior management). Training can be online or in person, the latter mainly directed to new employees, and the objective is to equip them with skills that enable them to collaborate with the control functions in mitigating the risks inherent to the execution of their functions. In 2021, novobanco reinforced training on money laundering and terrorism financing prevention, having provided 14.150 horas hours of online training (including 1542 hours for senior management) and 88 hours of face-to-face training (of
which 20 hours for senior management), making a total of 14 238 hours.
The prevention of money laundering and terrorism financing is one of the foundations of confidence in the financial system and as such this issue will continue to receive the ongoing attention of novobanco Group.

The monitoring of the implementation of the Code of Conduct in NB shall be of the responsibility of the Compliance Department, which, to this end, may use other structures, including the Internal Audit Department and the Human Resources Department.
The contacts of the structure and the identification of the person responsible is disclosed to all Employees of the entity and to the NB Compliance Department.
In 2021 the novobanco Group examined 5.851 new contracts, of which 75 were rejected. In addition, 2391 other contracts were analysed, upon which their ownership was changed. It also analysed 13 161 transactions under existing contracts, of which 663 were reported to the competent authorities.
The main pillars of novobanco AML policy are KYC, KYT, and KYP. On a very high-level approach, these involve (among other things): customer identification, customer assessment through risk scoring (countries where it operates, its shareholding structure, etc.), list matching (OFAC, EU, FINCEN, etc), and transaction monitoring. For all this, novobanco follows a risk based approach, to ensure the adequate attention is directed to where it is most needed. As a result, customers and accounts which are deemed to be of a higher risk (such as PEPs, for example), are subject to deeper scrutiny (EDD) and Senior Management approval, and transactions are monitored more closely. Any situation where there may be grounds for suspicion, and for which no sound explanation can be found, is promptly reported to the proper authorities, in strict compliance with all applicable laws and regulations. Compliance matters, particularly AML, have been receiving a great deal of attention from the highest levels of management and have been embedded in the culture of the whole organization.
In addition, the new Code of Conduct has a specific paragraph concerning Money Laundering. Novobanco external audit is exercised by the independent and External Auditor, Ernst & Young and the authorities of Supervisors that the novobanco is subject: European Central Bank, Bank of Portugal, Committee on Securities Market (CMVM) and the Insurance Institute of Portugal. The External Auditor has, within its jurisdiction and beyond the statutory audit, to rule before the Bank of Portugal on the efficiency and functioning of mechanisms of Internal Control (Notice No. 5 / 2008, Bank of Portugal) and to issue before CMVM an annual report on the adequacy of procedures and measures taken by novobanco, as a financial intermediary, to safeguard the assets of clients (article 304 º C-4 and 306 and following of the Securities Code).
Besides novobanco group compliance with legal requirements - all cash deliveries amounting to 15 000 Euros or more are subject to identification and to declare the origin of funds. If client is considered a high risk client, the declaration of origin of funds is mandatory for all values equal or above 5 000 Euros.
novobanco uses FISERV’s AML Manager, intelligent tool, using the most important standards used in the European risk system, based in transactional risk and client profile risk.
The establishment of strategic policies is done centrally, and applicable throughout novobanco Group, in conjunction with local requirements. Transaction monitoring is done centrally for all Portuguese branches, and most subsidiaries. International units have their own compliance teams which perform their analysis locally, in close contact with the central Compliance team.
Additionally, all SWIFT, TARGET2 and SEPA transactions are filtered on-line against international lists (OFAC, EU, FINCEN, UN and HMT for the UK and GAFI/FTF),and may be blocked for scrutiny by the Compliance Department in case a close match is found. The message will only be allowed to proceed after it has been approved by Compliance. As mentioned previously, all suspicious activity for which no reasonable explanation can be found are duly reported to the proper authorities for further investigation.
The type of training used at novobanco improves the internal supervision exercised by all employees and therefore contributes to reducing risk. Thanks to the extra training provided all employees are now better prepared to identify potential cases of money laundering and terrorism financing.