National Bank of Kuwait SAKP

|1.|• The Board of Directors has the overall responsibility to oversee and ensure effective implementation of NBK Group ESG Strategy through its designation to the Sustainability & Climate Change Committee, which is chaired by the Vice Chairman & GCEO. • The Board shall be apprised of the Bank's approach, performance, targets, and key initiatives towards addressing climate, environmental, and social risks.| [...] |2.|• The Sustainability & Climate Change Committee shall supervise, coordinate, and manage the overall Group ESG Strategy and the implementation of NBK Group's ESG commitments, initiatives, and activities in line with the Group ESG Strategy.| [...] |3.|• The Sustainability Department shall be the custodian and responsible for coordinating the implementation of the ESG Strategy, projects and initiatives and shall provide specialized focus and guidance on the material topics identified through stakeholder engagement.

In 2023, NBK launched a modular ESG governance framework with Board oversight. NBK also adopted measures to handle climate and ESG risks and opportunities. In this context, NBK institutionalized alignment with the recommendations of Taskforce on Climate-related Financial Disclosures (TCFD) during the year and developed a roadmap for adequately integrating climate-related matters in the bank's enterprise risk management framework. [...] During 2023, NBK adopted the following measures to handle climate and ESG related risks and opportunities: o The Board approved the Group ESG Strategy, setting a formal implementation mandate. o ESG metrics have been integrated into the Board and Executive Management's responsibilities o A scenario analysis was conducted on the loan portfolio o Developed portfolio and sector emission risk heat maps o An approved ESG Governance Structure and Framework outlined responsibilities to the Executive Management and embedded ESG into policies and processes o A Sustainability & Climate Change Committee, headed by the Vice Chairman & GCEO, has been established o Five Sustainability Sub-Committees have been created, delegating ESG roles to the Executive Management o The bank joined the UNGC to enhance international alignment and stakeholder engagement o A TCFD alignment pre-assessment process has been initiated including capacity-building workshops [...] The S&CC Committee and its five Sub-Committees convened several times during FY2023 to establish mandate and formalize the ESG Strategy Roadmap for FY2023-2025. The key outcomes from the committees' meetings included: - Orchestrated the development of the ESG Governance Model. - Approved institutionalizing the development of a Group-wide ESG Policy. - Authorized the development of a Taskforce on Climate-related Financial Disclosures (TCFD) Manual with the aim of reporting on the TCFD recommendations in FY2024. - Monitored the launch of ESG retail products, expanding NBK's consumer offerings in Kuwait to Eco-friendly Housing Loan and Eco-Friendly Auto Loan. - Endorsed the development of client engagement plans to increase ESG awareness among consumers and support corporate clients in designing and implementing their transition ambitions. - Monitored the launch of an online Sustainability training module to all NBK employees in order to foster NBK's ESG culture through encouraging awareness and collaboration on ESG across the Group. - Approved the integration of ESG principles into NBK Kuwait Procurement Policy and supply chain management. - Approved the CSR Budget for FY 2024 aligned with the Group ESG Strategy and the UN Sustainable Development Goals (SDGs).

The Executive Management is delegated with the due diligence and management of the ESG impacts. To ensure the Board oversight, the Executive Management periodically reports to the Board on those matters, to ensure the effectiveness of the process, and more importantly, the implication of the reported matters on the Bank's decisions on any emerging matters. [...] To drive implementation, NBK has established a Sustainable Financing Working Group (SFWG) that selects, monitors, governs, and reports on NBK's financing of Green and Social Assets. The SFWG is chaired by a member of senior management and consists of senior members from each of Finance, Treasury, Risk Management, Investor Relations and Corporate Sustainability. [...] NBK has an independent AML/CFT unit reporting to the Board Risk and Compliance Committee. The Anti-Financial Crimes area, including Anti-Fraud, Anti-Bribery and Corruption, operates under Group Compliance and Governance which reports to the Board Risk and Compliance Committee. Our AML/CFT Policy, Anti-Fraud Policy, and Anti-Bribery and Corruption Policy are reviewed annually and approved by the Board of Directors. [...] NBK has established a Whistleblowing Policy accessible to all employees. The complaint is directly made to the Chairman of the Board and the information remains confidential and is saved anonymously to provide protection to the employee. This mechanism is subject to review by Group Internal Audit.

##### 3.1 Board of Directors Oversight

The Board of Directors (BoD) is the highest governing body and has the responsibility of implementing the Bank's ESG strategy. The BoD's charter was updated in 2022 to include ESG-specific mandates. In 2023, the BoD approved our ESG Strategy supported with a comprehensive ESG Governance Framework, which entails delegating strategic responsibilities to our existing Board Committees and formulating ESG-specific management committees. The BoD maintains an oversight role on ESG matters through the delegation of its responsibilities to the Sustainability and Climate Change (S&CC) Committee.

- **Board Risk and Compliance Committee**
The purpose of this committee is to assist the Board in fulfilling its responsibility for oversight of the Bank's enterprise risk management and compliance functions. The Board Risk and Compliance Committee (BRCC) has been empowered to manage climate-related risks and opportunities. The Committee will ensure that the Bank's exposure to ESG and climate-related risks are assessed, quantified and integrated into the Bank's Group-wide risk management framework, alongside other material risks. The BRCC is also responsible for the review and approval of credit and Sustainability risk-related policies.

- **Board Credit Committee**
This committee assists the Board in fulfilling its oversight of the review and approval of credit commitments and credit limits. We shall integrate sustainability-related and climate risk considerations into the Board Credit Committee's charter, emphasizing the importance of underscoring the sustainability aspect of a credit or lending proposal, as much as financial considerations.

- **Board Audit Committee**
The BAC is responsible for providing oversight into the integrity of the Bank's financial reporting process, as well as the effectiveness of our internal control system and its compliance with all statutory requirements. It ensures that ESG factors are incorporated into the annual risk-based internal audit plan. It also ensures that ESG considerations are embedded into the institution's governance and organizational structures. Additionally, it oversees the ESG disclosure processes, ensuring alignment with international best practices. Finally, the committee is responsible for assessing the sufficiency of internal controls, ensuring accuracy, reliability, and consistency of data over time.

##### 3.2 Executive Management Oversight

**Sustainability & Climate Change Committee:**
The S&CC Committee is the highest executive governing body at the management level. The S&CC Committee is chaired by the current Vice Chairman and Group CEO with direct BoD oversight. The S&CC Committee has been assigned key performance indicators (KPIs) to steer decision-making in line with the Bank's ESG strategy. The S&CC Committee is responsible for:

- Executing the BoD's directions by assessing and reporting on the Bank's sustainability and ESG performance.

- Provision of guidance, feedback, and support to the Sustainability Sub-Committees on the identification of risks and opportunities, in addition to controls, resource mobilization, and strategy execution.

- Facilitating engagement and collaboration across the Bank on the implementation of the ESG Strategy.

These targets are established through an ongoing process of aligning with global best practices and stakeholders' expectations. In addition, the Sub-Committees provide critical insights and recommendations on controls, mitigation strategies, and actionable plans to address identified material topics effectively. Details of the Sub-Committees and their purposes can be found in the table below.

To supervise, manage, and approve the development of sustainable finance value propositions and realization of business opportunities presented by the transition to a low carbon economy, in line with our ESG Strategy and Sustainable Financing Framework. This also includes managing the Bank's strategic approach to reducing the environmental impact of its portfolio

To govern the selection and monitoring of eligible projects in line with our Sustainable Financing Framework. The SFWG is also responsible for aligning with and supporting the Sustainable & Transition Finance Committee in fulfilling its responsibilities

To oversee and govern the Bank's efforts in expanding community engagement and investment, and social considerations for our stakeholders, in line with the Bank's ESG Strategy and CSR focus

To supervise, manage, and approve the integration of ESG matters into the Bank's overall governance and risk activities. The Committee oversees the alignment of the Bank's activities with international sustainability frameworks, emphasizing the Bank's commitment to transparency and accountability

To supervise, manage, and approve the integration of ESG matters into the Bank's own operations, including environmental footprint (operational), supply chain and procurement practices, human capital management, and digital transformation elements, in line with our ESG Strategy."

"We have established two management-level committees to oversee and manage the bank's various sustainable finance activities. Under our Framework, an amount equivalent to the net proceeds from our sustainable financing instruments will be used to finance or re-finance eligible assets that provide distinct environmental and/or social benefits."

"Following risk identification and assessment, we shift our focus on embedding ESG and climate risks within our broader risk management framework. This includes reviewing and updating our existing risk governance and developing an ESG risk framework to reflect the responsibilities of different stakeholders in assessing and managing ESG and climate risks. Furthermore, we will enhance our credit and investment risk management practices by aligning credit underwriting and investment policies with our ESG strategy and policy."

"We are in the process of incorporating ESG metrics as part of our client credit assessments, covering aspects of both physical and transition risks. We have added a dedicated ESG section to our Credit Policy Manual (CPM) and introduced ESG rating scores to guide credit-related decision-making for existing and potential clients.